West Pharmaceutical Svcs
West Pharmaceutical Svcs
WST
$1.05
0.48%
45%
IBD Stock Analysis
- Approaching 222.06 buy point from flat base
- Rebounded from 10-week moving average line last week
- West Pharma leads the medical supplies industry group
Industry Group Ranking
Emerging Pattern
Flat Base
* Not real-time data. All data shown was captured at
12:35PM EDT on
06/24/2020.
West Pharmaceutical Services (WST) is the IBD Stock Of The Day as the top-ranked medical stock flirts with a buy point.
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West Pharma manufactures delivery systems for injectable drugs and health care products. That makes it a key partner for biopharma companies amid the frantic race to develop effective coronavirus treatments and vaccines.
Jefferies analyst David Windley “can barely imagine more going right” for West Pharma.
“Management has executed well on operational efficiency improvement, product-line extensions and diligence around customer demand,” he said in a report. “Covid-19 adds new pipeline growth for its customers with a heavy bias toward injectables, West Pharma’s wheelhouse.”
Medical Stock Flirts With Buy Point
But on today’s stock market, West Pharmaceutical stock dipped 0.5% to 216.51 during an overall down session for stocks. Still, that was better than a broader 2% dive for the medical supplies industry group. The group itself ranks No. 38 out of 197 industry groups that Investor’s Business Daily tracks.
And West Pharma stock leads them all with a near-perfect Composite Rating of 98 out of a total 99. The Composite Rating is a 1-99 measure of a stock’s technical and fundamental metrics. This puts the medical stock in the top 2% of all stocks.
West Pharma stock is forming a flat base with a buy point at 222.06. Shares rebounded off their 10-week moving average last week, providing an earlier entry.
Meanwhile, things continue to look up for West Pharma. Unlike some industries, many medical stocks have flourished amid the coronavirus pandemic. For West Pharma, a commercial ramp-up for a coronavirus treatment or vaccine could be huge, William Blair analyst John Kreger said.
Adding $300 Million To The Top Line?
West Pharma makes some of the components necessary to package and inject drugs. For example, a drugmaker could tap the medical stock to manufacture the elastomer components for a global vaccine. Elastomer is a natural or synthetic polymer that has elastic properties, like rubber.
The elastomer products would likely require FluroTec coating and other high-value features, Kreger said in a report. FluroTec is a barrier film that protects drugs from contamination.
“We assume 30 cents per unit would be a reasonable revenue contribution,” he said. “If correct, 1 billion units would translate into $300 million in annual revenues, or a 15% boost to the company’s current revenue base.”
Expectations For Growth In 2020
Analysts are already fairly bullish on expectations for West Pharmaceutical’s revenue and profit growth in 2020. For the year, analysts polled by Zacks Investment Research call for $1.96 billion in sales, up 6.7%, and adjusted income of $3.61 a share, rising 11.4%.
This would continue a four-year trend of single-digit revenue growth for West Pharma.
CFRA analyst Kevin Huang also has bullish views for 2020. Huang expects operating margins to improve to 17.1% this year. That would be better than 16.1% in 2019 and 14.5% in 2018. Gross margins likely also will benefit from lower oil prices. Oil is a raw material for the medical stock.
“West Pharma’s operating margin expansion over the past several years has been driven by increased facility utilization, sales of high-value products and operational efficiency initiatives,” he said in a report.
Quarterly growth also has remained strong. In the recent first quarter, earnings popped 36% and sales increased 11%. Sales growth has now accelerated for two straight quarters. Earnings growth has either sped up or stayed flat for the past three quarterly periods.
Highly Rated Medical Stock
West Pharma is also highly rated, per IBD measures.
Shares have a Relative Strength Rating of 92 out of a best-possible 99. The RS Rating pits a stock against all others in terms of 12-month performance. This means the medical stocks ranks in the top 8% of all stocks on that measure.
The medical stock also has a strong EPS Rating of 94 out of a total 99. The EPS Rating is a score of profitability. West Pharma ranks in the top 6% of all stocks.
Representatives of West Pharma didn’t immediately return a request for comment.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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