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Here's Why You Should Retain 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). However, forex remains a concern.
Shares of the Zacks Rank #3 (Hold) company surged 33.4% compared with the industry’s growth of 2.5% in a year’s time. The S&P 500 Index has rallied 16% in the same time frame.
West Pharmaceutical — with a market capitalization of $29.13 billion — is a leading global manufacturer with respect to the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It anticipates earnings to improve 27.6% over the next five years. The company has a trailing four-quarter earnings surprise of 29.4%, on average.
Key Catalysts
The proprietary products business continues to exhibit sustained strength and is an important contributor to West Pharmaceutical’s top-line growth. This segment’s customers primarily comprise several of the major biologic, generic, and pharmaceutical drug companies globally that incorporate components and other offerings into their injectable products for distribution to patients.
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 35.7% organically in the third quarter owing to double-digit growth in HVP (which accounted for 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 third-quarter gross profit margin witnessed an expansion of 550 basis points on a year-over-year basis driven by a favorable mix of products sold (stemming from the demand in HVP), production efficiencies and an increase in sales price.
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West Pharmaceutical maintains its 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 third quarter of 2021, the company’s R&D expenses rose 4.8% from the prior-year quarter. West Pharmaceutical remains committed to 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 fulfill ideas for potential value creation.
Factor Hurting the Stock
Growing exposure to the international markets makes the company susceptible to adverse foreign exchange volatility. The unfavorable fluctuations in currency exchange rates can affect West Pharmaceutical’s international sales.
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 0.2% to $9.01.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.12 billion, suggesting growth of 11.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.
Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 21.9%. The company currently carries a Zacks Rank #2.
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. The company’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.
Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.
Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.
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Here's Why You Should Retain 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). However, forex remains a concern.
Shares of the Zacks Rank #3 (Hold) company surged 33.4% compared with the industry’s growth of 2.5% in a year’s time. The S&P 500 Index has rallied 16% in the same time frame.
West Pharmaceutical — with a market capitalization of $29.13 billion — is a leading global manufacturer with respect to the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. It anticipates earnings to improve 27.6% over the next five years. The company has a trailing four-quarter earnings surprise of 29.4%, on average.
Key Catalysts
The proprietary products business continues to exhibit sustained strength and is an important contributor to West Pharmaceutical’s top-line growth. This segment’s customers primarily comprise several of the major biologic, generic, and pharmaceutical drug companies globally that incorporate components and other offerings into their injectable products for distribution to patients.
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 35.7% organically in the third quarter owing to double-digit growth in HVP (which accounted for 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 third-quarter gross profit margin witnessed an expansion of 550 basis points on a year-over-year basis driven by a favorable mix of products sold (stemming from the demand in HVP), production efficiencies and an increase in sales price.
West Pharmaceutical maintains its 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 third quarter of 2021, the company’s R&D expenses rose 4.8% from the prior-year quarter. West Pharmaceutical remains committed to 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 fulfill ideas for potential value creation.
Factor Hurting the Stock
Growing exposure to the international markets makes the company susceptible to adverse foreign exchange volatility. The unfavorable fluctuations in currency exchange rates can affect West Pharmaceutical’s international sales.
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 0.2% to $9.01.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.12 billion, suggesting growth of 11.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) .
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.5%. The company currently sports a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.
Henry Schein beat earnings estimates in each of the trailing four quarters, the average surprise being 21.9%. The company currently carries a Zacks Rank #2.
Henry Schein’s long-term earnings growth rate is estimated at 11.8%. The company’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.
Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.
Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.