Yahoo Finance Here's Why You Should Retain West Pharmaceutical (WST) Now
West Pharmaceutical Services, Inc. WST 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 lost 7.2% compared with the industry's decline of 5.4% in a year. The S&P 500 Index has fallen 2.7% in the same period.
West Pharmaceutical — with a market capitalization of $22.47 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 10.4% over the next five years. The company has a trailing four-quarter earnings surprise of 16.6%, 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.
Sales improved 14.4% organically in the first quarter of 2022. High-value products (components and devices) accounted for more than 70% of segment sales and delivered double-digit organic sales growth. Consumer demand for NovaPure and Westar components led to the upside. With respect to the performance of the market units, the biologics market unit witnessed strong double-digit growth.
Image Source: Zacks Investment Research
The company continues to work with several biotech and biopharma customers who are utilizing West and Daikyo HVP offerings. The generics market unit delivered mid-single-digit growth, driven by sales of FluroTec and Westar components. Pharma market unit saw high-single-digit growth sales growth led by HVP, including Daikyo and NovaPure components.
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 first quarter of 2022, the company's R&D expenses increased 19.7% 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 first-quarter 2022 earnings call, the projected forex headwind on earnings per share has an increased impact of approximately 38 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 0.3% to $9.31 per share.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.06 billion, suggesting growth of 7.9% from the year-ago reported number.
Stocks to Consider
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Masimo Corporation MASI and Veeva Systems, Inc. VEEV.
AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.6%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare’s long-term earnings growth rate is estimated at 1.1%. The company’s earnings yield of 11.4% compares favorably with the industry’s (0.8%).
Masimo beat earnings estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2 (Buy).
Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 22.3%. The company’s earnings yield is pegged at 3.8% against the industry’s (8.5%).
Veeva Systems surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.6%. The company currently carries a Zacks Rank #2.
Veeva Systems’ long-term earnings growth rate is estimated at 18.1%. The company’s earnings yield of 2.4% compares favorably with the industry’s 0.2%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Masimo Corporation (MASI) : Free Stock Analysis Report
AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
Veeva Systems Inc. (VEEV) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
