Here’s why you should choose West Pharmaceutical (WST) now

West Pharmaceutical Services, Inc. WST is well positioned for growth, supported by the strong proprietary product segment and a sustained strength in research and development (R&D). However, currency volatility remains a problem.

Shares of this company Zacks Rank #3 (Hold) fell 33.2% from the industrydrop of 10.3% in one year. The S&P 500 index fell 15.4% over the same period.

West Pharmaceutical, with a market capitalization of $23.21 billion, is a leading global manufacturer in the design and production of high quality, technologically advanced integrated containment and delivery systems for injectable drugs and products. health. Its revenues are expected to improve by 27.2% over the next five years. The company has an earnings surprise for the last four quarters of 9.43% on average.

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Key catalysts

The exclusive products business continues to show sustained strength and contributes significantly to WST’s revenue. Customers in this segment primarily include several of the world’s leading pharmaceutical, generic and biologic companies that integrate components and other offerings into their injectable products for distribution to patients.

Sales increased by 13.1% organically in the second quarter of 2022. High value-added products (components and devices) accounted for more than 70% of segment sales and recorded double-digit organic sales growth. Consumer demand for NovaPure, Envision and Daikyo Crystal Zenith auto-injection components and devices led the rise. Strong double-digit organic sales growth in the biologics and generics market units and mid-single-digit organic sales growth in the pharmaceutical market unit were other highlights of the quarter. The expansion of adjusted operating margin also bodes well for the company.

West Pharmaceutical maintains its research-scale production facilities and laboratories to create new products and provides contract engineering design and development services to help customers develop new products.

The company continues to pursue innovative strategic platforms in pre-fillable syringes, injectable containers, advanced injections, and safety and delivery systems. In the second quarter of 2022, the company’s R&D expenditure increased by 4.3% compared to the year-ago quarter. West Pharmaceutical remains committed to seeking new and innovative opportunities for the acquisition, licensing, partnership or development of products, services and technologies. WST is focused on its goal of connecting the dots through science and technology to realize ideas of potential value creation.

Factors Affecting Stock

The growing exposure to international markets makes the company vulnerable to adverse exchange rate volatility. Adverse fluctuations in exchange rates may affect West Pharmaceutical’s international sales. During the second quarter 2022 earnings call, the company forecast a headwind in forex on revenue of $190 million, up from previous expectations of $115 million.

In addition, the continued decline in the contract manufacturing segment is concerning. The decline in demand for COVID-related products is concerning from a business perspective. The contraction in the gross margin does not bode well. West Pharmaceutical’s lower financial outlook for the full year is also causing apprehension.

Price from West Pharmaceutical Services, Inc.

Price from West Pharmaceutical Services, Inc.

Price from West Pharmaceutical Services, Inc. | Quote from West Pharmaceutical Services, Inc.

Estimate trend

West Pharmaceutical has witnessed a downward trend in estimates for 2022. Over the past 60 days, Zacks’ consensus estimate for its earnings has fallen 2.3% to $9.09 per share.

Zacks’ consensus estimate for 2022 revenue is $2.97 billion, suggesting 4.8% growth from the figure reported a year ago.

Actions to consider

Some top-ranked actions from the broader medical field are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAVs and McKesson Corporation MCK.

AMN Healthcare, currently ranked Zacks #1 (Strong Buy), has an estimated long-term growth rate of 3.2%. AMN’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 15.7%.

You can see the full list of today’s Zacks #1 Rank stocks here.

AMN Healthcare loses 6.6% compared to industrydown 33.4% over the past year.

ShockWave Medical, currently sporting a Zacks No. 1 ranking, has an estimated growth rate of 33.1% for 2023. SWAV earnings have exceeded estimates for the past four quarters, averaging 180.1% .

ShockWave Medical gained 35.3% over industry27% drop over the past year.

McKesson, which currently holds Zacks No. 2 ranking (buy), has an estimated long-term growth rate of 9.9%. MCK’s earnings beat estimates in three of the past four quarters and missed the same in one, averaging 13%.

McKesson won 77.7% against the industrydown 10.7% over the past year.

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