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Reasons to Hold West Pharmaceutical (WST) in Your Portfolio Now
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West Pharmaceutical Services, Inc. (WST - Free Report) is well poised for growth, backed by the robust Proprietary Products segment and sustained strength in research and development (R&D). However, foreign exchange volatility is a concern.
Shares of this currently Zacks Rank #3 (Hold) company have risen 9.6% year to date compared with the industry's 5.2% growth. The S&P 500 Index has increased 8% in the same time frame.
West Pharmaceutical, with a market capitalization of $27.71 billion, is a leading global manufacturer, engaged in the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. Its earnings are anticipated to improve 7.3% over the next five years. The company delivered a trailing four-quarter average earnings surprise of 11.43%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Catalysts
The Proprietary Products business continues to exhibit sustained strength and is an important contributor to WST's top line. This segment's customers primarily comprise several major biologic, generic and pharmaceutical drug companies globally that incorporate its components and other offerings in their injectable products.
Sales improved 1.4% organically in the fourth quarter of 2023. High-value products (components and devices) accounted for more than 70% of segmental sales and delivered mid-single-digit organic sales growth. Demand for high-value products is likely to have continued in the first quarter of 2024. The company may register a similar trend for the rest of 2024.
Growth in demand, especially for high-value products, and strong performance in the Contract Manufacturing market unit, buoy optimism. West Pharmaceutical also continues to expand its high-value product manufacturing capacity to support rising customer demand from recent launches and anticipates drug programs in the coming years.
Robust organic growth of Proprietary Products’ Generics and Pharma market units is another quarterly highlight.
WST maintains its research-scale production facilities and laboratories for creating new products. It also provides contract engineering design and development services to help customers with new product developments.
The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injections, and safety and administration systems. In the fourth quarter of 2023, the company's R&D expenses increased 15.7% from the prior-year period’s level.
West Pharmaceutical remains committed to seeking innovative opportunities for the acquisition, licensing, partnering or development of products, services and technologies. The company is focused on its objective of connecting dots throughout science and technology for potential value creation.
Factors Hurting the Stock
The growing exposure to international markets makes WST susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect the company’s international sales. Declining sales related to COVID-19 vaccines continue to hurt the Biologics market unit. West Pharmaceutical’s pandemic-related sales are also likely to be negligible in 2024, thereby hurtingProprietary Products’ revenue growth.
Contraction in gross and operating margins does not bode well.
Estimates Trend
The company has been witnessing a negative estimate movement for 2024. In the past seven days, the Zacks Consensus Estimate for earnings has moved down from $8.79 per share to $7.78, implying a decline of 3.7% from the prior-year level. The consensus mark for revenues is pegged at $3.01 billion, indicating a 2.1% increase from the 2023 level.
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.57%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 32% year to date compared with the industry’s 7.9% growth.
Biodesix, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 29% for 2024. BDSX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 13.96%.
Biodesix’s shares have lost 20.1% year to date against the industry’s 6.2% growth.
Cardinal Health, sporting a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.2%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.64%.
Cardinal Health’s shares have rallied 10.2% year to date compared with the industry’s 5.2% growth.
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Reasons to Hold West Pharmaceutical (WST) in Your Portfolio Now
West Pharmaceutical Services, Inc. (WST - Free Report) is well poised for growth, backed by the robust Proprietary Products segment and sustained strength in research and development (R&D). However, foreign exchange volatility is a concern.
Shares of this currently Zacks Rank #3 (Hold) company have risen 9.6% year to date compared with the industry's 5.2% growth. The S&P 500 Index has increased 8% in the same time frame.
West Pharmaceutical, with a market capitalization of $27.71 billion, is a leading global manufacturer, engaged in the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. Its earnings are anticipated to improve 7.3% over the next five years. The company delivered a trailing four-quarter average earnings surprise of 11.43%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Catalysts
The Proprietary Products business continues to exhibit sustained strength and is an important contributor to WST's top line. This segment's customers primarily comprise several major biologic, generic and pharmaceutical drug companies globally that incorporate its components and other offerings in their injectable products.
Sales improved 1.4% organically in the fourth quarter of 2023. High-value products (components and devices) accounted for more than 70% of segmental sales and delivered mid-single-digit organic sales growth. Demand for high-value products is likely to have continued in the first quarter of 2024. The company may register a similar trend for the rest of 2024.
Growth in demand, especially for high-value products, and strong performance in the Contract Manufacturing market unit, buoy optimism. West Pharmaceutical also continues to expand its high-value product manufacturing capacity to support rising customer demand from recent launches and anticipates drug programs in the coming years.
Robust organic growth of Proprietary Products’ Generics and Pharma market units is another quarterly highlight.
WST maintains its research-scale production facilities and laboratories for creating new products. It also provides contract engineering design and development services to help customers with new product developments.
The company continues to pursue innovative strategic platforms in prefillable syringes, injectable containers, advanced injections, and safety and administration systems. In the fourth quarter of 2023, the company's R&D expenses increased 15.7% from the prior-year period’s level.
West Pharmaceutical remains committed to seeking innovative opportunities for the acquisition, licensing, partnering or development of products, services and technologies. The company is focused on its objective of connecting dots throughout science and technology for potential value creation.
Factors Hurting the Stock
The growing exposure to international markets makes WST susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect the company’s international sales. Declining sales related to COVID-19 vaccines continue to hurt the Biologics market unit. West Pharmaceutical’s pandemic-related sales are also likely to be negligible in 2024, thereby hurtingProprietary Products’ revenue growth.
Contraction in gross and operating margins does not bode well.
Estimates Trend
The company has been witnessing a negative estimate movement for 2024. In the past seven days, the Zacks Consensus Estimate for earnings has moved down from $8.79 per share to $7.78, implying a decline of 3.7% from the prior-year level. The consensus mark for revenues is pegged at $3.01 billion, indicating a 2.1% increase from the 2023 level.
West Pharmaceutical Services, Inc. Price
West Pharmaceutical Services, Inc. price | West Pharmaceutical Services, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Biodesix (BDSX - Free Report) and Cardinal Health (CAH - Free Report) .
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.57%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 32% year to date compared with the industry’s 7.9% growth.
Biodesix, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 29% for 2024. BDSX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 13.96%.
Biodesix’s shares have lost 20.1% year to date against the industry’s 6.2% growth.
Cardinal Health, sporting a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.2%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.64%.
Cardinal Health’s shares have rallied 10.2% year to date compared with the industry’s 5.2% growth.