Reasons to Retain West Pharmaceutical Stock in Your Portfolio for Now

West Pharmaceutical Services, Inc. WST is well-positioned for growth, backed by the robust GLP-1-related demand and expansion plans. However, pricing headwinds and tariff risks are concerning.

Shares of this Zacks Rank #3 (Hold) company have lost 20.3% so far this year compared with the industry's 0.9% decline. The S&P 500 Index has increased 14% in the same time frame.

West Pharmaceutical, with a market capitalization of $18.87 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 8.4% over the next five years. The company delivered a trailing four-quarter average earnings surprise of 16.81%.

Let’s delve deeper.

Key Catalysts

Strong High-Value Product Momentum: High-value products(HVPs) remain West Pharmaceutical’s core growth driver, accounting for a rising proportion of revenues and delivering superior margins compared to standard components. In recent quarters, HVP components have grown at double-digit rates, supported by biologics adoption, stricter regulatory requirements, and customer preference for higher-quality drug packaging solutions.

Annex 1 conversions alone are driving hundreds of projects across global pharma partners, with HVP components typically generating two to three times the margin of standard products. Management expects the HVP mix to expand nearly 100 basis points annually, creating a structural tailwind for profitability. Importantly, WST’s ability to leverage its installed base and expand capacity in HVP-focused facilities strengthens both revenue visibility and margin durability. The sustained mix shift supports long-term earnings growth and differentiates the company from its peers.

Exposure to GLP-1 Therapeutics: West Pharmaceutical is directly benefiting from the explosive growth in GLP-1 drugs for diabetes and obesity. Elastomer components and delivery devices associated with GLP-1 therapies accounted for nearly 8% of total revenues in the first half of 2025, representing one of the fastest-growing segments of the company. With the GLP-1 class projected to grow into a multi-billion-dollar global franchise, West Pharmaceutical’s strategic partnerships and multi-year contracts with leading drug manufacturers provide a significant runway for growth.

The company’s investments in capacity expansion, particularly in Dublin and Grand Rapids, are designed to meet escalating demand for injectable solutions tied to these therapies. This exposure not only supports revenue growth but also enhances West Pharmaceutical’s visibility into long-term demand trends, aligning the company with one of the most transformative drug categories in healthcare.

Operational Efficiency and Margin Management:Despite pricing pressure and a temporary supply constraint at one facility, WST is maintaining margins through improved operational efficiency, restructuring actions and SG&A control. Automation of SmartDose production (expected late 2025/early 2026) is a long-term lever to improve margins in delivery devices. WST has also reaffirmed its capital allocation strategy toward margin-accretive investments and shareholder returns, further supporting EPS upside.

Factors Hurting the Stock

Tariff and Geopolitical Risks: Tariffs remain a material headwind, with management estimating a $15-$20 million impact for the remainder of 2025. While mitigation levers such as pass-through pricing, local sourcing, and global manufacturing shifts are in place, full recovery remains uncertain. Escalating geopolitical tensions and shifting trade policies could increase cost volatility and potentially erode competitiveness. In addition, West Pharmaceutical’s reliance on raw materials like elastomers, aluminum, and plastics exposes it to supply-chain disruptions and price fluctuations. Persistent cost pressures could dampen profitability and limit the pace of future margin expansion.

Operational Constraints and Execution Risk: Despite strong demand, West Pharmaceutical faces near-term operational challenges, particularly at a European HVP facility constrained by hiring and training bottlenecks. Management has outlined a 12-18 month remediation plan involving network optimization and technology transfers, but execution risks remain high. Any delay could disrupt supply, impact customer confidence, or slow revenue recognition from high-margin projects. Similarly, contract manufacturing ramps, such as the Dublin facility, require long validation cycles before reaching optimal utilization. These constraints temper near-term growth potential and leave West Pharmaceutical exposed to execution missteps, potentially creating earnings volatility.

Estimate Trend

WST has been witnessing a positive estimate revision for 2025. In the past 60 days, the Zacks Consensus Estimate for earnings has remained stable at $6.74 per share, implying a decline of 0.2% from the prior-year level. The consensus mark for revenues is pegged at $3.02 billion, indicating a 4.5% increase from the 2024 level.

West Pharmaceutical Services, Inc. Price

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

Key Picks

Some better-ranked stocks in the broader medical space are Masimo MASI, Merit Medical System MMSI and Cardinal Health CAH, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo shares have lost 10.4% so far this year compared with the industry’s 7.4% decline. Estimates for the company’s 2025 earnings per share have increased 1.3% to $5.30 in the past 30 days.

MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 13.8%. In the last reported quarter, it posted an earnings surprise of 8.1%.

Estimates for Merit Medical’s 2025 earnings per share have increased 0.8% to $3.63 in the past 60 days. Shares of the company have lost 13.8% so far this year against the industry’s 1.1% growth.

MMSI’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.92%. In the last reported quarter, it delivered an earnings surprise of 17.44%.

Estimates for Cardinal Health’s fiscal 2026 earnings per share have increased 0.6% to $9.45 in the past 60 days. Shares of the company have gained 30.4% so far this year compared with the industry’s 0.9% growth.

CAH’s earnings beat estimates in each of the trailing four quarters, the average surprise being 9.17%. In the last reported quarter, it delivered an earnings surprise of 2.46%.

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This article originally published on Zacks Investment Research (zacks.com).

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