/West%20Pharmaceutical%20Services%2C%20Inc_%20logo%20on%20phone-by%20rafapress%20via%20Shutterstock.jpg)
Exton, Pennsylvania-based West Pharmaceutical Services, Inc. (WST) designs, manufactures and sells containment and delivery systems for injectable drugs and healthcare products. With a market cap of $22.9 billion, West Pharmaceutical’s operations span the Americas, Europe, the Middle East, Africa, and the Indo-Pacific.
The contract manufacturer has substantially lagged behind the broader market over the past year. WST has plunged 10.1% on a YTD basis and 9.9% over the past year compared to the S&P 500 Index’s ($SPX) 25.2% gains in 2024 and 31% returns over the past year.
Narrowing the focus, WST has also underperformed the First Trust Indxx Global Medical Devices ETF’s (MDEV) 4.5% gains on a YTD basis and 14.3% returns over the past year.
West Pharmaceutical had a tough start to the year. Its stock prices plummeted 14.1% after the release of its FY 2023 earnings on Feb.15 as the company gave a disappointing full-year topline and earnings guidance for 2024. The company forecasted its full-year net sales to reach approximately $3 billion, representing a 1.7% growth from $2.95 billion net sales reported in FY 2023. Moreover, its adjusted EPS guidance range of $7.50 to $7.75 for 2024 represented a decline in expected earnings from $8.08 adjusted EPS in 2023, unsettling investor confidence.
However, more recently WST stock prices surged 15.4% on Oct. 24 following the release of its better-than-expected Q3 earnings. Due to lower sales volumes of NovaBrand products and FluroTec, Westar, and NovaPure products, WST’s Generics market unit and Biologics market units observed a drop in net sales leading to an overall decline in sales and earnings. The company’s Q3 net sales observed a marginal decline to $746.9 million while its adjusted net income plunged 16.2% year-over-year to $136.1 million. Nevertheless, its adjusted EPS of $1.85 exceeded analysts’ consensus estimates by a staggering 22.5%, leading to a positive momentum in stock prices.
For the current fiscal year, ending in December, analysts expect WST to report a 17.5% year-over-year drop in adjusted EPS to $6.67. The company’s earnings surprise history is mixed. It surpassed analysts’ bottom-line estimates thrice over the past four quarters while missing on another occasion.
WST stock has a consensus “Strong Buy” rating overall. Among the eight analysts covering the stock six recommend “Strong Buy,” and two advise a “Hold” rating.
This configuration has been consistent over the past months.
On Nov. 20, Jefferies analyst David Windley maintained a “Buy” rating with a price target of $393, indicating an upside potential of 24.1% to current price levels.
WST’s mean price target of $366 represents a premium of 15.6% to current price levels. Meanwhile, the Street-high target of $470 suggests a massive upside potential of 48.5%.
