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Reasons to Hold West Pharmaceutical (WST) in Your Portfolio Now

West Pharmaceutical Services, Inc. WST 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 Zacks Rank #3 (Hold) company have risen 7.8% year to date compared with the industry's 2.2% growth. The S&P 500 Index has increased 6.4% in the same time frame.

West Pharmaceutical, with a market capitalization of $27.73 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 7.7% over the next five years. The company delivered a trailing four-quarter average earnings surprise of 11.43%.

Let’s delve deeper.

Zacks Investment Research
Zacks Investment Research


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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.

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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. The 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 stable estimate movement for 2024. In the past 30 days, the Zacks Consensus Estimate for earnings has remained unchanged at $7.62, implying a decline of 5.7% 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. 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, Biodesix BDSX and Cencora COR.

DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DaVita’s shares have risen 23.8% compared with the industry’s 2.8% growth year to date.

Biodesix, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 29% in 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 13.96%.

BDSX’s shares have lost 32.1% year to date against the industry’s 1.4% growth.

Cencora, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 9.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.7%.

Cencora’s shares have risen 16% year to date compared with the industry’s 1.4% growth.

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Cencora, Inc. (COR) : Free Stock Analysis Report

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Biodesix, Inc. (BDSX) : Free Stock Analysis Report

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