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 18.5% so far this year against the industry's 9.1% gain. The S&P 500 Index has increased 18.6% in the same time frame.

West Pharmaceutical, with a market capitalization of $19.14 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 9.1% over the next five years. The company delivered a trailing four-quarter average earnings surprise of 15.52%.

Positive Factors Driving WST’s Prospects

Strong Momentum in High-Value Product (HVP) Components: HVP Components remain the core engine of WST’s growth, rising 13% organically in the third quarter and benefiting from multi-year structural drivers. Management highlighted normalizing biologics demand, rising biosimilar activity and a continuing mix shift from standard to high-value elastomers.

With 90%+ participation in biologics and biosimilars and a global network of HVP manufacturing sites, WST is well positioned for sustained double-digit HVP growth. The company also reported meaningful gross-margin uplift from HVP mix and improved network efficiency, reinforcing its long-term margin-expansion trajectory.

Expanding GLP-1 Opportunity: GLP-1 elastomer components now account for 9% of total company revenues, rising rapidly due to injectable demand, increased vial utilization, new clinical trials and emerging generics activity. Management emphasized that WST’s GLP-1 growth is broader than prescription trends, supported by pipeline launches and geographic expansion.

Additionally, GLP-1 device manufacturing in the Contract Manufacturing segment (notably in Dublin) further enhances exposure, with validation underway for commercial drug-handling production beginning in early 2026. Together, the businesses position GLP-1s as a durable multi-year growth vector.

Significant Growth Tailwind from Annex 1: Annex 1 regulatory requirements in Europe are accelerating conversions from standard components to HVP offerings. WST now has 375 active projects and expects HVP upgrades (including Annex 1) to contribute 200 bps of growth in 2025, up from the prior 150 bps outlook.

Only a small fraction of the estimated 6 billion addressable components has converted, giving WST a long runway of high-margin, compliance-driven demand that aligns with its quality and documentation strengths.

Improving Free Cash Flow and Margin Upside: Free cash flow has risen 54% year to date, aided by capital discipline and improved supply-chain efficiencies. Gross margin expanded 120 bps despite the 2024 incentive fee headwind.

Management cited structural savings from better yields, scrap reduction, procurement efficiencies and a more optimized manufacturing footprint. These initiatives, combined with mix shift to higher-margin HVP, support management’s expectation of renewed margin expansion in 2026.

Key Challenges Facing WST

Contract Manufacturing Headwinds: The company expects the second CGM contract to conclude in mid-2026, creating a $40 million second-half revenue headwind. While management is confident in backfilling the capacity with higher-margin work, the timing gap, equipment transitions, and ramp-up create near-term uncertainty and execution risk.

Timing Variability in Annex 1: Although Annex 1 is a multi-year catalyst, conversion timelines vary widely (3-8 quarters), affecting quarterly revenue flow. Similarly, FDA approval timing for new molecules has slowed, which can delay HVP adoption. These timing factors introduce volatility in an otherwise steady business model.

Delivery Devices Remain a Profitability Drag: The SmartDose 3.5, part of delivery device business, continues to face margin pressure despite sequential improvements. Meanwhile, automation for SmartDose is on track to go live in early 2026, which should help improve profitability. However, until then, delivery devices remain a headwind within the Proprietary segment, with long-cycle decisions still pending.

Estimate Trend

WST has been witnessing a positive estimate revision for 2025. In the past 30 days, the Zacks Consensus Estimate for earnings has moved north 1.3% to $6.74 per share, implying a gain of 4.9% from the prior-year level. The consensus mark for revenues is pegged at $3.06 billion, indicating a 5.9% increase from the 2024 level.

Key Picks

Some better-ranked stocks in the broader medical space are Medpace Holdings MEDP, Intuitive Surgical ISRG and Boston Scientific BSX.

Medpace, currently carrying a Zacks Rank #2 (Buy), reported third-quarter 2025 earnings per share (EPS) of $3.86, which surpassed the Zacks Consensus Estimate by 10.29%. Revenues of $659.9 million beat the Zacks Consensus Estimate by 3.04%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy)stocks here.

MEDP has an estimated earnings growth rate of 18% for 2025 compared with the industry’s 15.5% growth. The company beat on earnings in each of the trailing four quarters, the average surprise being 14.28%.

Intuitive Surgical, sporting a Zacks Rank #1 at present, posted third-quarter 2025 adjusted EPS of $2.40, which exceeded the Zacks Consensus Estimate by 20.6%. Revenues of $2.51 billion topped the Zacks Consensus Estimate by 3.9%.

ISRG has an estimated long-term earnings growth rate of 15.7% compared with the industry’s 12.9% growth. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 16.34%.

Boston Scientific, currently carrying a Zacks Rank #2, reported third-quarter 2025 adjusted EPS of 75 cents, which surpassed the Zacks Consensus Estimate by 5.6%. Revenues of $5.07 billion outperformed the Zacks Consensus Estimate by 1.9%.

BSX has an estimated long-term earnings growth rate of 16.4% compared with the industry’s 13.2% growth. The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 7.36%.

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

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

Zacks Investment Research