West Pharmaceutical Services, Inc. WST is well poised for growth, backed by the robust Proprietary Products segment and sustained strength in research and development (R&D). However, foreign exchange volatility is a concern.

Shares of this Zacks Rank #3 (Hold) company have gained 5.8% in the past six months compared with the industry's 4.4% growth. The S&P 500 Index has increased 8.3% in the same time frame.

West Pharmaceutical, with a market capitalization of $24.36 billion, is a leading global manufacturer, engaged in the design and production of technologically advanced, high-quality, integrated containment and delivery systems for injectable drugs and healthcare products. Its earnings are anticipated to improve 2.5% over the next five years. The company delivered a trailing four-quarter average earnings surprise of 8.04%.

Image Source: Zacks Investment Research

Let’s delve deeper.

Key Catalysts

West Pharmaceutical delivered better-than-expected third-quarter results, signaling resilience and recovery despite ongoing challenges in its Generics and Biologics business units. While these areas experienced a decline, the company’s rebound from the customer destocking impact observed in the second quarter sets a positive tone for the fourth quarter. With updated guidance and a diminished impact of currency headwinds on organic revenue growth, WST appears poised for stronger performance in the near term.

Despite a 0.5% organic sales decline in the third quarter of 2024, the company’s High-Value Products (“HVP”) segment showcased resilience, contributing more than 75% of segmental sales and achieving mid-single-digit organic sales growth. The Proprietary Products segment also demonstrated mid-single-digit growth within its Pharma market unit, driven by NovaBrand products and Administrative Systems. However, the Generics and Biologics units experienced mid-single-digit and low-single-digit declines, respectively, due to reduced volumes and lower sales of specific products like FluroTec, Westar and NovaPure.

West Pharmaceutical’s outlook for the fourth quarter reflects optimism, with expectations of year-over-year quarterly sales improvement. Several factors underpin this optimism. Despite challenges, WST has maintained its market share, suggesting that the declines in Generics and Biologics may be temporary. Meanwhile, the ongoing strength in the HVP segment, coupled with no imminent slowdown, is likely to bolster overall sales. The company’s expansion of high-value product manufacturing capacity further supports rising customer demand and aligns with anticipated future drug programs.

Moreover, the company increased its R&D expenses by 2.9% in the third quarter, emphasizing its focus on innovation. West Pharmaceutical continues to explore opportunities in prefillable syringes, injectable containers, advanced injections and safety systems — strategic platforms that align with emerging market needs. Approvals for new biologics are expected to result in additional revenues, boosting the Biologics unit’s top-line growth.

Through acquisitions, licensing and partnerships, WST is strategically positioning itself to leverage advancements in science and technology, creating the potential for value generation across its offerings.

Factors Hurting the Stock

The growing exposure to international markets makes WST susceptible to adverse foreign exchange volatility. Unfavorable fluctuations in currency exchange rates can affect the company’s international sales. Meanwhile, the contraction in gross and operating margins does not bode well for WST. The majority of this contraction is due to the rising cost of materials, which is likely to have continued in the fourth quarter.

Estimates Trend

The company has been witnessing a declining stable estimate movement for 2025. In the past 60 days, the Zacks Consensus Estimate for earnings decreased 3 cents to $7.52 per share, implying an improvement of 12.7% from the prior-year level. The consensus mark for revenues is pegged at $3.03 billion, indicating a 5.2% increase from the 2024 level.

West Pharmaceutical Services, Inc. Price

West Pharmaceutical Services, Inc. price | West Pharmaceutical Services, Inc. Quote

Stocks to Consider

Some better-ranked stocks in the broader medical space are Masimo MASI, Accuray ARAY and Abbott Laboratories ABT.

Masimo, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 11.8% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.

MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 60.3% compared with the industry’s 2.2% growth year to date.

Accuray, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 1200% for 2025. Its earnings missed estimates in three of the trailing four quarters and met in one, delivering an average negative surprise of 141.97%.

ARAY’s shares have gained 14.9% compared with the industry’s 2.3% growth in the past six months.

Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%.

ABT’s shares have risen 9.4% in the past six months compared with the industry’s 9.5% growth.

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

Abbott Laboratories (ABT) : Free Stock Analysis Report

Accuray Incorporated (ARAY) : Free Stock Analysis Report

Masimo Corporation (MASI) : Free Stock Analysis Report

West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research