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West Pharmaceutical (WST) Q3 Earnings & Revenues Beat Estimates

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·5 min read
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  • WST
  • DGX
  • ABT
  • HCA

West Pharmaceutical Services, Inc. WST reported third-quarter 2021 adjusted earnings per share (EPS) of $2.06, which beat the Zacks Consensus Estimate of $1.82 by 13.2%. The bottom line soared 79.1% year over year.

GAAP EPS in the quarter was $2.31, up 112% from the prior-year quarter.

Revenue Details

The company reported revenues of $706.5 million, which increased 28.9% from the prior-year quarter. The top line outpaced the Zacks Consensus Estimate by 3.2%.

The company reported organic sales growth of 27.9%.

Segment Details

Proprietary Products

Net sales at the segment amounted to $577 million, reflecting year-over-year improvement of 36.9%. Organic sales growth came in at 35.7%. High-value products (components and devices) accounted for more than 70% of segment sales and delivered double-digit organic sales growth. Customer demand for FluroTec, Westar, NovaPure components and Daikyo Crystal Zenith containers 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 improved 2.4% year over year to $129.7 million. The segment delivered organic sales growth of 2.1%. Sales of healthcare-associated medical devices contributed to the improvement.

Margins

Gross profit in the reported quarter was $288.2 million, up 48.1% year over year. As a percentage of revenues, gross margin in the quarter was 40.8%, up 530 basis points (bps).

Research and development expenses totaled $13.1 million, up 4.8% from the year-ago quarter. Selling, general and administrative expenses amounted to $91.9 million, up 20.6% on a year-over-year basis.

Operating income was $181.4 million, up 82.9% year over year. As a percentage of revenues, operating margin in the quarter was 25.7%, up 760 bps.

Financial Position

The company exited the third quarter with cash and cash equivalents of $688 million, compared with $576.2 million in the previous quarter.

Cumulative operating cash flow in the third quarter totaled $423.2 million, compared with $323.8 million in the prior-year period.

Share Repurchase and Dividend Announcement

During the first nine months of 2021, the company repurchased shares worth $131.7 million under its share repurchase program.

With respect to dividend, the West Pharmaceutical’s board of directors approved a fourth-quarter 2021 dividend of 18 cents per share, an increase of 5.9% over 17 cents per share that was paid in each of the four trailing quarters. Interestingly, this marks the company’s 29th consecutive annual dividend hike.

Outlook

On the back of the solid third-quarter 2021 performance, the company raised its full-year 2021 guidance.

Net sales for full-year 2021 are projected between $2.80 billion and $2.81 billion (up from the prior range of $2.76-$2.79 billion). The Zacks Consensus Estimate for the same is currently pegged at $2.78 billion.

Organic sales growth is estimated to be 28% (up from the prior range of 24-25%).

Adjusted earnings per share for 2021 is anticipated in the band of $8.40 to $8.50 (up from the previous range of $8.05-$8.20 per share). Notably, this range includes an expected benefit of around 19 cents (compared to prior anticipated benefit of 27 cents) based on present foreign currency exchange rates.

Wrapping Up

West Pharmaceutical exited third-quarter 2021 on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. The company witnessed strong performance across its segments. Expansion in both gross and operating margins in the reported quarter buoys optimism. Given the strength exhibited in the quarter under review, a raised 2021 outlook instills confidence.

Per management, sustained momentum in organic sales growth in both its base business, and higher demand for its products related to COVID-19 vaccines drove the third-quarter results. The company delivered solid growth across all three of its Proprietary Products market units, driven by higher sales with respect to components in its HVP portfolio.

However, increase in selling, general and administrative expenses remains a concern.

Zacks Rank

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

Earnings of Other MedTech Majors at a Glance

Some other top-ranked stocks in the broader medical space that have already announced their quarterly results are Quest Diagnostics Incorporated DGX, Abbott Laboratories ABT, and HCA Healthcare, Inc. HCA, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics reported third-quarter 2021 adjusted EPS of $3.96, which beat the Zacks Consensus Estimate by 33.8%. Third-quarter revenues of $2.77 billion outpaced the consensus mark by 12.6%.

Abbott reported third-quarter 2021 adjusted EPS of $1.40, which surpassed the Zacks Consensus Estimate by 52.2%. Third-quarter revenues of $10.93 billion outpaced the Zacks Consensus Estimate by 15.3%.

HCA Healthcare reported third-quarter 2021 adjusted EPS of $4.57, surpassing the Zacks Consensus Estimate by 11.5%. Revenues of $15.28 billion surpassed the Zacks Consensus Estimate by 4.7%.


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