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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 the robust Proprietary Products segment and the sustained strength in research and development (R&D). However, the foreign exchange volatility remains a woe.
Shares of this Zacks Rank #3 (Hold) company have surged 39.3% compared with the industry's growth of 9.7% in a year. The S&P 500 Index has rallied 9.1% in the same period.
West Pharmaceutical — with a market capitalization of $30.72 billion — is a leading global manufacturer in 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 by 9.6% over the next five years. The company has a trailing four-quarter earnings surprise of 26.3%, on average.
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 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 the fourth quarter of 2021, sales at this segment improved 36.8% organically due to the double-digit growth in high-value products (HVP) that accounted for 74% of sales in the quarter and the strong momentum throughout all market units in the quarter under review. The biologics market unit reported solid double-digit growth, driven by the Westar and NovaPure components. The generics and pharma market units witnessed double-digit growth, led by sales of the FluroTec and Westar components.
Image Source: Zacks Investment Research
The margin expansion in this segment has been encouraging. The fourth-quarter gross profit margin witnessed an expansion of 460 basis points on a year-over-year basis, driven by a favorable mix of products sold (stemming from 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 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 2021, the company's R&D expenses increased 6.2% from the prior-year quarter. West Pharmaceutical remains committed to seeking new innovative opportunities for the acquisition, licensing, partnering or development of products, services and technologies. WST is focused on its objective to connect dots throughout science and technology to fulfill ideas for potential value creation.
Factor Hurting the Stock
The growing exposure to international markets makes the company susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect West Pharmaceutical's international sales. Per the fourth-quarter 2021 earnings call, the projected forex headwind on earnings per share has an impact of approximately 21 cents for 2022 (based on current foreign currency exchange rates).
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 2.9% to $9.28 per share.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.06 billion, suggesting growth of 8.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Edwards Lifesciences Corporation (EW - Free Report) and Henry Schein, Inc. (HSIC - Free Report) .
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 20%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has gained 36.7% against the industry’s decline of 55.2% over the past year.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 13.9%. EW’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 6.5%.
Edwards Lifesciences has appreciated 44.4% compared with the industry’s rise of 0.9% over the past year.
Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #2.
Henry Schein has surged 29.1% compared with the industry’s rally of 9.8% over the past year.
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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 the robust Proprietary Products segment and the sustained strength in research and development (R&D). However, the foreign exchange volatility remains a woe.
Shares of this Zacks Rank #3 (Hold) company have surged 39.3% compared with the industry's growth of 9.7% in a year. The S&P 500 Index has rallied 9.1% in the same period.
West Pharmaceutical — with a market capitalization of $30.72 billion — is a leading global manufacturer in 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 by 9.6% over the next five years. The company has a trailing four-quarter earnings surprise of 26.3%, on average.
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 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 the fourth quarter of 2021, sales at this segment improved 36.8% organically due to the double-digit growth in high-value products (HVP) that accounted for 74% of sales in the quarter and the strong momentum throughout all market units in the quarter under review. The biologics market unit reported solid double-digit growth, driven by the Westar and NovaPure components. The generics and pharma market units witnessed double-digit growth, led by sales of the FluroTec and Westar components.
Image Source: Zacks Investment Research
The margin expansion in this segment has been encouraging. The fourth-quarter gross profit margin witnessed an expansion of 460 basis points on a year-over-year basis, driven by a favorable mix of products sold (stemming from 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 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 2021, the company's R&D expenses increased 6.2% from the prior-year quarter. West Pharmaceutical remains committed to seeking new innovative opportunities for the acquisition, licensing, partnering or development of products, services and technologies. WST is focused on its objective to connect dots throughout science and technology to fulfill ideas for potential value creation.
Factor Hurting the Stock
The growing exposure to international markets makes the company susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect West Pharmaceutical's international sales. Per the fourth-quarter 2021 earnings call, the projected forex headwind on earnings per share has an impact of approximately 21 cents for 2022 (based on current foreign currency exchange rates).
Estimates Trend
West Pharmaceutical has been witnessing an upward estimate revision trend for 2022. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved north by 2.9% to $9.28 per share.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.06 billion, suggesting growth of 8.1% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Edwards Lifesciences Corporation (EW - Free Report) and Henry Schein, Inc. (HSIC - Free Report) .
AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 20%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has gained 36.7% against the industry’s decline of 55.2% over the past year.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 13.9%. EW’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 6.5%.
Edwards Lifesciences has appreciated 44.4% compared with the industry’s rise of 0.9% over the past year.
Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #2.
Henry Schein has surged 29.1% compared with the industry’s rally of 9.8% over the past year.