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Here's Why You Should Invest in West Pharmaceutical (WST) Now
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West Pharmaceutical Services, Inc. (WST - Free Report) is well-poised for growth backed by a robust Proprietary Products segment and sustained strength in research and development (R&D).
The stock has surged 66.7% compared with the industry’s growth of 29.5% in a year’s time. The S&P 500 Index has rallied 31% in the same time frame.
West Pharmaceutical — with a market capitalization of $33.25 billion — is a leading global manufacturer with respect to design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It anticipates earnings to improve 28.4% over the next five years. The company has a trailing four-quarter earnings surprise 29.6%, on average.
Image Source: Zacks Investment Research
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #2 (Buy).
Key Catalysts
Proprietary products business continues to exhibit sustained strength and is an important contributor to the West Pharmaceutical’s top-line growth. This segment’s customers mainly comprise several of the major biologic, generic, and pharmaceutical drug companies in the world that incorporate components and other offerings into their injectable products for distribution to patients, who are the end users.
In 2020, net sales at this segment increased 17.9% on a year-over-year basis and the first half of 2021 was no exception. Sales improved 39.6% organically in the second quarter owing to double-digit growth in HVP (which made up 70% of sales in the quarter) and strong momentum throughout biologics and pharma market units in the quarter under review.
Margin expansion in this segment has been encouraging. The second-quarter gross profit margin witnessed an expansion of 700 basis points on a year-over-year basis driven by favorable mix of products sold (stemming from the demand in HVP), production efficiencies and increase in sales price.
West Pharmaceutical maintains its own research-scale production facilities and laboratories for creating new products, and provides contract engineering design and development services to help customers with new product development.
The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injection, and safety and administration systems. In the second quarter of 2021, the company’s R&D expenses increased 27.8% from the prior-year quarter. West Pharmaceutical also remains committed toward seeking new innovative opportunities for acquisition, licensing, partnering or development of products, services and technologies. The company is focused on its objective to connect the dots throughout science and technology to fulfil ideas for potential value creation.
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 14.9% to $8.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $684.7 million, suggesting growth of 24.9% from the year-ago reported number.
Image: Bigstock
Here's Why You Should Invest in West Pharmaceutical (WST) Now
West Pharmaceutical Services, Inc. (WST - Free Report) is well-poised for growth backed by a robust Proprietary Products segment and sustained strength in research and development (R&D).
The stock has surged 66.7% compared with the industry’s growth of 29.5% in a year’s time. The S&P 500 Index has rallied 31% in the same time frame.
West Pharmaceutical — with a market capitalization of $33.25 billion — is a leading global manufacturer with respect to design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It anticipates earnings to improve 28.4% over the next five years. The company has a trailing four-quarter earnings surprise 29.6%, on average.
Image Source: Zacks Investment Research
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #2 (Buy).
Key Catalysts
Proprietary products business continues to exhibit sustained strength and is an important contributor to the West Pharmaceutical’s top-line growth. This segment’s customers mainly comprise several of the major biologic, generic, and pharmaceutical drug companies in the world that incorporate components and other offerings into their injectable products for distribution to patients, who are the end users.
In 2020, net sales at this segment increased 17.9% on a year-over-year basis and the first half of 2021 was no exception. Sales improved 39.6% organically in the second quarter owing to double-digit growth in HVP (which made up 70% of sales in the quarter) and strong momentum throughout biologics and pharma market units in the quarter under review.
Margin expansion in this segment has been encouraging. The second-quarter gross profit margin witnessed an expansion of 700 basis points on a year-over-year basis driven by favorable mix of products sold (stemming from the demand in HVP), production efficiencies and increase in sales price.
West Pharmaceutical maintains its own research-scale production facilities and laboratories for creating new products, and provides contract engineering design and development services to help customers with new product development.
The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injection, and safety and administration systems. In the second quarter of 2021, the company’s R&D expenses increased 27.8% from the prior-year quarter. West Pharmaceutical also remains committed toward seeking new innovative opportunities for acquisition, licensing, partnering or development of products, services and technologies. The company is focused on its objective to connect the dots throughout science and technology to fulfil ideas for potential value creation.
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 14.9% to $8.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $684.7 million, suggesting growth of 24.9% from the year-ago reported number.
Other Stocks to Consider
Some other top-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Envista Holdings Corporation (NVST - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) , each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Henry Schein’s long-term earnings growth rate is estimated at 13.9%.
Envista Holdings’ long-term earnings growth rate is estimated at 27.4%.
Merit Medical’s long-term earnings growth rate is projected at 13.6%.