West Pharmaceutical Services Faces Year of Struggles and Surprises
West Pharmaceutical Services, Inc. (WST), located in Exton, Pennsylvania, specializes in creating, manufacturing, and selling containment and delivery systems for injectable drugs and healthcare products. As of now, the company boasts a market capitalization of $22.9 billion, operating across the Americas, Europe, the Middle East, Africa, and the Indo-Pacific.
Performance Lag Behind Market Peers
Over the past year, WST has notably underperformed compared to the broader market. The stock has decreased by 10.1% year-to-date and 9.9% over the past year. In contrast, the S&P 500 Index ($SPX) has gained 25.2% in 2024 and achieved a remarkable 31% return over the last year.
Additionally, when comparing WST to the First Trust Indxx Global Medical Devices ETF (MDEV), it has underperformed there too. MDEV recorded gains of 4.5% year-to-date and 14.3% over the past year.
Shaky Financial Outlook
WST began 2023 on a low note, with its stock plunging 14.1% following the release of its fiscal year 2023 earnings on February 15. The company issued disappointing guidance for full-year revenue and earnings in 2024, projecting net sales to be around $3 billion—a modest 1.7% increase from $2.95 billion in revenue reported in FY 2023. Adjusted earnings per share (EPS) are expected to be between $7.50 and $7.75 for 2024, indicating a decline from $8.08 in 2023. This forecast rattled investor confidence significantly.
A Glimmer of Hope in Q3
In a surprising turn, WST’s stock rose 15.4% on October 24 after announcing better-than-expected Q3 earnings. The company faced sales declines in its Generics and Biologics market units due to decreased volumes in its NovaBrand, FluroTec, Westar, and NovaPure products. While Q3 net sales slipped to $746.9 million and adjusted net income fell 16.2% year-over-year to $136.1 million, the adjusted EPS of $1.85 exceeded expectations by an impressive 22.5%. This news helped boost stock prices positively.
For the current fiscal year ending in December, analysts predict a 17.5% decrease in adjusted EPS to $6.67. WST’s history of earnings surprises has shown mixed results; it has outperformed analysts’ estimates three times in the last four quarters while falling short once.
Analysts Remain Optimistic
Currently, WST stock holds a consensus “Strong Buy” rating. Out of the eight analysts covering it, six recommend a “Strong Buy,” while two suggest a “Hold” rating.
Jefferies analyst David Windley reaffirmed a “Buy” rating on November 20, giving a price target of $393, which indicates a potential upside of 24.1% from current price levels. Furthermore, WST’s mean price target of $366 represents a premium of 15.6%, while the highest target on the Street of $470 implies a considerable upside of 48.5% from current levels.
On the date of publication, Aditya Sarawgi did not hold any positions in the securities mentioned in this article. All data provided is strictly for informational purposes. For more details, please refer to the Barchart Disclosure Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
