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West Pharmaceutical (WST) Q1 Earnings Top Estimates, Revenues Lag

·5 min read

West Pharmaceutical Services, Inc. WST reported first-quarter 2022 adjusted earnings per share (EPS) of $2.30, which beat the Zacks Consensus Estimate of $2.18 by 5.5%. The bottom line improved 12.2% year over year.

GAAP EPS in the quarter was $2.29, up 15.1% from the prior-year quarter.

Revenue Details

The company reported revenues of $720 million, which increased 7.4% from the prior-year quarter. The top line missed the Zacks Consensus Estimate by 0.7%.

The company reported organic sales growth of 11%.

Segment Details

Proprietary Products

Net sales at the segment amounted to $601.3 million, reflecting a year-over-year improvement of 10.6%. Organic sales growth came in at 14.4%. 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.

West Pharmaceutical Services, Inc. Price, Consensus and EPS Surprise

West Pharmaceutical Services, Inc. Price, Consensus and EPS Surprise
West Pharmaceutical Services, Inc. Price, Consensus and EPS Surprise

West Pharmaceutical Services, Inc. price-consensus-eps-surprise-chart | West Pharmaceutical Services, Inc. Quote

Contract-Manufactured Products

In the reported quarter, net sales fell 6.6% year over year to $118.7 million. The segment saw a 3.8% decline in organic sales. Decrease in sales of components for diagnostic services led to the downside.

Margins

Gross profit in the reported quarter was $284.6 million, up 4.7% year over year. As a percentage of revenues, gross margin in the quarter was 40%, down 100 basis points (bps).

Research and development expenses totaled $14.6 million, up 19.7% from the year-ago quarter. Selling, general and administrative expenses amounted to $83.4 million, up 3.9% on a year-over-year basis.

Operating income was $189.7 million, up 8% year over year. As a percentage of revenues, operating margin in the quarter was 26.3%, up 10 bps.

Financial Position

The company exited the first quarter with cash and cash equivalents of $667.7 million, compared with $762.6 million in the previous quarter.

Operating cash flow in the first quarter amounted to $151.2 million, compared with $88.7 million in the prior-year period.

2022 Guidance

The company has reaffirmed its full-year 2022 net sales outlook. Net sales for full-year 2022 are projected between $3.05 billion and $3.08 billion. The Zacks Consensus Estimate for the same is currently pegged at $3.06 billion.

It is worth mentioning that the abovementioned guidance includes an estimated full-year 2022 headwind of $115 million (up from the previously guided estimate of $70 million) on the basis of present forex rates.

Organic sales growth is estimated in the range of 11-12% (up from the previous estimate of about 10%).

West Pharmaceutical has raised its 2022 outlook for adjusted earnings per share. Currently, the company projects adjusted earnings per share in the band of $9.30 to $9.45 (up from the previously guided range of $9.20 to $9.35). The revised outlook includes a positive impact from first-quarter tax benefits from stock-based compensation of 12 cents. The Zacks Consensus Estimate for the same is currently pegged at $9.28 per share.

Wrapping Up

West Pharmaceutical exited first-quarter 2022 on a mixed note, wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same. The company witnessed a strong performance in its Proprietary Products segment. Expansion in operating margin in the reported quarter buoys optimism.

Per management, the company remains on track to boost capacity throughout 2022 to cater to the growing demand of components in its HVP portfolio.

However, an increase in selling, general and administrative expenses remains a concern. Weakness in Contract-Manufactured Products unit and contraction in gross margin is disappointing.

Zacks Rank

West Pharmaceutical currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Some other top-ranked stocks in the broader medical space that have announced quarterly results are Qiagen N.V. QGEN, UnitedHealth Group Incorporated UNH and Centene Corporation CNC.

Qiagen, carrying a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qiagen has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 11.7%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.7%.

Centene reported first-quarter 2022 adjusted EPS of $1.83, which beat the Zacks Consensus Estimate by 8.9%. First-quarter revenues of $37.2 billion outpaced the Zacks Consensus Estimate by 7.2%. It currently has a Zacks Rank #2.

Centene has an estimated long-term growth rate of 14.2%. CNC has an earnings yield of 6.6% compared with the industry’s 5.6%.


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