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West Pharmaceutical (WST) Misses on Q2 Earnings, Lowers '24 View
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West Pharmaceutical Services, Inc. (WST - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $1.52, which missed the Zacks Consensus Estimate by 14.1%. The bottom line was also down 28% year over year.
The adjustments include expenses related to the amortization of acquisition-related intangible assets.
GAAP EPS for the quarter was $1.51, down 26.7% year over year.
Revenues in Detail
West Pharmaceutical registered net sales of $702.1 million, down 6.9% year over year. The figure also missed the Zacks Consensus Estimate by 4.8%.
The company recorded an organic net sales decline of 5.9% in the reported quarter.
Per management, the top-line decline was driven by an elevated level of customer destocking across its business units. However, higher Contract Manufacturing component sales partially offset the decline. The company expects to return to growth in the fourth quarter of 2024.
Segmental Details
West Pharmaceutical operates under two segments — Proprietary Products and Contract-Manufactured Products.
Net sales in the Proprietary Products segment were $559.7 million, indicating a decline of 9.4% year over year and 8.4% on an organic basis. HVP net sales, which accounted for more than 70% of the segment’s net sales, were driven by customer demand for self-injection, Envision® components and NovaPure products.
Sales of the Proprietary Products segment's Pharma market units reflected a low-single-digit percentage point organic decline during the quarter. The Generic market unit registered a double-digit percentage point decline in sales. The Biologics market unit recorded a mid-single-digit organic sales decline.
Product-wise, the company witnessed a decline for its Administrative Systems, FluroTec and Westar products, along with lower sales for Daikyo Crystal Zenith components, partially offset by growth in self-injection device platforms.
Net sales in the Contract-Manufactured Products segment increased 4.9% year over year to $142.4 million. Currency translation was a headwind, hurting sales growth by 50 basis points. The segment saw a 5.4% improvement in organic net sales.
West Pharmaceutical Services, Inc. Price, Consensus and EPS Surprise
West Pharmaceutical’s gross profit decreased 21.1% to $230 million. The gross margin contracted nearly 590 basis points (bps) to 32.8%.
Selling, general and administrative expenses declined 6.1% to $83 million. Research and development expenses went up 8% to $17.5 million.
Adjusted operating profit totaled $126.4 million, indicating a decrease of 31.7% from the prior-year quarter’s level. The adjusted operating margin contracted 650 bps to 18%.
Financial Position
West Pharmaceutical exited second-quarter 2024 with cash and cash equivalents of $446.2 million compared with $601.8 million at the end of the first quarter. Total debt at the end of the reported quarter was $205.8 million compared with $206.2 million at the end of the previous quarter.
Cumulative net cash flow from operating activities totaled $283.2 million compared with $307.3 million in the year-ago period.
2024 Guidance
WST lowered its 2024 outlook for earnings as well as revenues.
It now expects adjusted EPS to be in the range of $6.35-$6.65 compared with the previous guidance of $7.63-$7.88. The Zacks Consensus Estimate for the same is pegged at $7.76.
Net sales are now projected to be between $2.87 billion and $2.9 billion compared with the previous guidance of $3-3.025 billion. The Zacks Consensus Estimate for the same is pegged at $3.01 billion. The company expects currency translation to have a negative impact of $5 million on revenues. The organic sales growth estimate is 1-2%.
Our Take
West Pharmaceutical exited the second quarter with dismal results. The decline across its key business units is concerning. Although the company witnessed sequential growth during the quarter, the destocking is likely to hurt third-quarter results as well. This is reflected in WST’s updated outlook for the year.
WST lowered its top and bottom-line outlook by more than 4% and 16%, respectively, as measured by the midpoint of the new and earlier guided ranges. The company also expects a strong headwind from currency translation that led to a reduction of 100 bps in organic revenue growth.
Shares of WST were down 15.1% during pre-market trading following its dismal quarterly performance as well as a significantly bleaker outlook for 2024. The company’s shares have lost 8% year to date against the industry’s growth of 1.4%. The broader S&P 500 Index has increased 14.1% in the same time frame.
Image Source: Zacks Investment Research
On a positive note, the company’s confirmed order book and ongoing customer conversations are likely to help the company to return to growth in the fourth quarter and beyond. Moreover, continued demand for self-injection, Envision components, NovaPure products and Contract-Manufactured Products is likely to help WST offset the decline in other products.
Zacks Rank and Stocks to Consider
Currently, West Pharmaceutical carries a Zacks Rank #4 (Sell).
GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 10.79%. Its shares have risen 36.3% year to date compared with the industry’s 7.3% growth.
Hologic, carrying a Zacks Rank of 2 at present, has a long-term growth rate of 7.4%. HOLX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.94%.
Hologic’s shares have risen 9.6% year to date compared with the industry’s 7.3% growth.
Masimo, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 9.3% for 2025. MASI’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 4.73%.
Masimo’s shares have lost 6.8% year to date against the industry’s 7.3% growth.
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West Pharmaceutical (WST) Misses on Q2 Earnings, Lowers '24 View
West Pharmaceutical Services, Inc. (WST - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $1.52, which missed the Zacks Consensus Estimate by 14.1%. The bottom line was also down 28% year over year.
The adjustments include expenses related to the amortization of acquisition-related intangible assets.
GAAP EPS for the quarter was $1.51, down 26.7% year over year.
Revenues in Detail
West Pharmaceutical registered net sales of $702.1 million, down 6.9% year over year. The figure also missed the Zacks Consensus Estimate by 4.8%.
The company recorded an organic net sales decline of 5.9% in the reported quarter.
Per management, the top-line decline was driven by an elevated level of customer destocking across its business units. However, higher Contract Manufacturing component sales partially offset the decline. The company expects to return to growth in the fourth quarter of 2024.
Segmental Details
West Pharmaceutical operates under two segments — Proprietary Products and Contract-Manufactured Products.
Net sales in the Proprietary Products segment were $559.7 million, indicating a decline of 9.4% year over year and 8.4% on an organic basis. HVP net sales, which accounted for more than 70% of the segment’s net sales, were driven by customer demand for self-injection, Envision® components and NovaPure products.
Sales of the Proprietary Products segment's Pharma market units reflected a low-single-digit percentage point organic decline during the quarter. The Generic market unit registered a double-digit percentage point decline in sales. The Biologics market unit recorded a mid-single-digit organic sales decline.
Product-wise, the company witnessed a decline for its Administrative Systems, FluroTec and Westar products, along with lower sales for Daikyo Crystal Zenith components, partially offset by growth in self-injection device platforms.
Net sales in the Contract-Manufactured Products segment increased 4.9% year over year to $142.4 million. Currency translation was a headwind, hurting sales growth by 50 basis points. The segment saw a 5.4% improvement in organic net sales.
West Pharmaceutical Services, Inc. Price, Consensus and EPS Surprise
West Pharmaceutical Services, Inc. price-consensus-eps-surprise-chart | West Pharmaceutical Services, Inc. Quote
Margins
West Pharmaceutical’s gross profit decreased 21.1% to $230 million. The gross margin contracted nearly 590 basis points (bps) to 32.8%.
Selling, general and administrative expenses declined 6.1% to $83 million. Research and development expenses went up 8% to $17.5 million.
Adjusted operating profit totaled $126.4 million, indicating a decrease of 31.7% from the prior-year quarter’s level. The adjusted operating margin contracted 650 bps to 18%.
Financial Position
West Pharmaceutical exited second-quarter 2024 with cash and cash equivalents of $446.2 million compared with $601.8 million at the end of the first quarter. Total debt at the end of the reported quarter was $205.8 million compared with $206.2 million at the end of the previous quarter.
Cumulative net cash flow from operating activities totaled $283.2 million compared with $307.3 million in the year-ago period.
2024 Guidance
WST lowered its 2024 outlook for earnings as well as revenues.
It now expects adjusted EPS to be in the range of $6.35-$6.65 compared with the previous guidance of $7.63-$7.88. The Zacks Consensus Estimate for the same is pegged at $7.76.
Net sales are now projected to be between $2.87 billion and $2.9 billion compared with the previous guidance of $3-3.025 billion. The Zacks Consensus Estimate for the same is pegged at $3.01 billion. The company expects currency translation to have a negative impact of $5 million on revenues. The organic sales growth estimate is 1-2%.
Our Take
West Pharmaceutical exited the second quarter with dismal results. The decline across its key business units is concerning. Although the company witnessed sequential growth during the quarter, the destocking is likely to hurt third-quarter results as well. This is reflected in WST’s updated outlook for the year.
WST lowered its top and bottom-line outlook by more than 4% and 16%, respectively, as measured by the midpoint of the new and earlier guided ranges. The company also expects a strong headwind from currency translation that led to a reduction of 100 bps in organic revenue growth.
Shares of WST were down 15.1% during pre-market trading following its dismal quarterly performance as well as a significantly bleaker outlook for 2024. The company’s shares have lost 8% year to date against the industry’s growth of 1.4%. The broader S&P 500 Index has increased 14.1% in the same time frame.
Image Source: Zacks Investment Research
On a positive note, the company’s confirmed order book and ongoing customer conversations are likely to help the company to return to growth in the fourth quarter and beyond. Moreover, continued demand for self-injection, Envision components, NovaPure products and Contract-Manufactured Products is likely to help WST offset the decline in other products.
Zacks Rank and Stocks to Consider
Currently, West Pharmaceutical carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical sector areGlobus Medical (GMED - Free Report) , Hologic (HOLX - Free Report) and Masimo (MASI - Free Report) .
Globus Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 12.7%. You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 10.79%. Its shares have risen 36.3% year to date compared with the industry’s 7.3% growth.
Hologic, carrying a Zacks Rank of 2 at present, has a long-term growth rate of 7.4%. HOLX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.94%.
Hologic’s shares have risen 9.6% year to date compared with the industry’s 7.3% growth.
Masimo, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 9.3% for 2025. MASI’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 4.73%.
Masimo’s shares have lost 6.8% year to date against the industry’s 7.3% growth.