Will Segmental Performance Drive West Pharmaceutical's Q1 Earnings?

West Pharmaceutical Services WST is scheduled to release first-quarter 2025 results on April 24, before the opening bell. In the last reported quarter, the company delivered an earnings beat of 4.00%. WST’s earnings beat estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.33%.

Q1 Estimates

Currently, the Zacks Consensus Estimate for revenues is pegged at $686.5 million, indicating a decline of 1.3% from the year-ago period’s level. The consensus mark for earnings is pinned at $1.30 per share, indicating a decline of 16.7% year over year. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)

Our model estimates total revenues to be $686.2 million, implying a 1.1% organic improvement year over year. The adjusted EPS is estimated to be $1.24. While the Proprietary Products segment sales are anticipated to be $549.7 million (organic growth of 1%), Contract-Manufactured Products segmental sales are likely to be $136.6 million (organic growth of 1.4%). However, operating profit for the Proprietary Products and Contract-Manufactured Products segments is likely to decline 15% and 30%, respectively.

Factors to Note

West Pharmaceutical Services delivered a solid fourth-quarter performance in 2024, beating both revenue and earnings expectations. With reported revenues of $748.8 million and earnings per share (EPS) of $1.82, the company demonstrated resilience despite industry-wide destocking challenges. As the company is poised to post first-quarter results, a segmental analysis suggests a mix of continued growth and stabilization, supported by strategic investments in high-value products (HVPs), contract manufacturing and biologics.

In the proprietary products segment, which remains the primary revenue driver, sales are likely to have continued to grow during the first quarter. The pharma market unit is also likely to have exhibited revenue growth from higher sales of Westar products and Administrative Systems. The Biologics market unit recorded high-single-digit organic net sales growth during the fourth quarter, driven by an increase in sales of self-injection device platforms, offset by lower sales of NovaPure products. A similar trend is likely to have existed during the first quarter. However, the generics segment might have witnessed continued decline.

West Pharmaceutical’s contract manufacturing segment's revenues reflected a slight decline in the last reported quarter. Sales are likely to have remained stable in the first quarter.

West Pharmaceutical Services, Inc. Price and EPS Surprise

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

The company is strategically expanding contract manufacturing capabilities, particularly in wearable self-injection devices and auto-injectors for GLP-1 treatments. With production ramping up in the Phoenix, Grand Rapids and Dublin facilities, contract manufacturing revenues should have remained steady in the first quarter, with the potential for long-term margin expansion as these initiatives mature.

One of the most promising growth areas for WST remains biologics, particularly through high-value containment and delivery systems. The company emphasized its strong positioning in immunology, oncology, rare diseases and obesity treatments. The ramp-up of on-body self-injection devices and increased customer engagement in biologics must have led to stronger demand in the first quarter. Some lingering destocking effects might have persisted, particularly in high-value products like NovaPure.

Despite these positive indicators, WST’s first-quarter financial performance is likely to have been influenced by macroeconomic factors and customer inventory management strategies. The lower production volumes in its high-margin HVP components and a mix shift to lower-margin drug delivery devices have been hurting gross profit margin in the past few quarters, a trend that’s likely to have continued in the soon-to-be-reported quarter. However, the company remains committed to operational improvements, automation and strategic pricing initiatives to support profitability.

WST is likely to have maintained its growth trend in the first quarter on the back of continued normalization in pharma and biologics, execution on high-value product expansion and ongoing improvements in contract manufacturing efficiencies. While some headwinds might have persisted, the company's strong market positioning, strategic investments and customer engagement looks promising.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for WST this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate is 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3 (Sell) at present.

Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to come up with an earnings beat this reporting cycle.

Cardinal Health CAH has an Earnings ESP of +0.54% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 36.37%. The Zacks Consensus Estimate for fthird-quarter fiscal 2025 EPS implies a rise of 34.4% from the year-ago reported figure.

Merit Medical Systems MMSI has an Earnings ESP of +0.19% and a Zacks Rank of 3 at present. 

The company is scheduled to release first-quarter 2025 results on April 24. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.14%. The Zacks Consensus Estimate for first-quarter 2025 EPS implies a 2.2% decline from the year-ago reported figure.

Globus Medical GMED has an Earnings ESP of +2.40% and a Zacks Rank #3 at present. The company is expected to release first-quarter 2025 results in May.

GMED delivered a trailing four-quarter average earnings surprise of 19.86%. The Zacks Consensus Estimate for first-quarter EPS implies an improvement of 2.8% from the year-ago reported figure.

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

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