West Pharmaceutical Services, Inc.
) reached a new 52-week high of $54.60 on Monday, October 1, 2012.
The closing price of this global provider of drug administration
systems' stock as of October 1, 2012 was $54.10, which represented
a solid year-over-year return of 31.4%.
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A favorable mix of record second quarter results, raised 2012
earnings guidance, incremental shareholders return, product
expansion and strategic penetration into high-growth markets - are
the major contributors of growth for this stock.
With respect to earnings surprises, West Pharmaceuticals has either
surpassed or met the Zacks Consensus Estimates in three of the last
four quarters, with an average beat of 6.04%.
On August 2, 2012, West Pharmaceuticals reported record constant
currency revenue growth of 11.3% to $324.8 million. Sales from the
Pharmaceutical Packaging Systems segment soared 13.1% in terms of
constant currency, led by favorable sales mix and higher selling
prices. Pharmaceutical Delivery Systems segment (up 6.1% in
constant currency) also contributed to revenue growth on the back
of strong product sales and contract services.
Despite currency headwinds and lack of customer inventory
visibility through the rest of 2012, robust first half results and
accretion from convertible debt financing have led the company to
revise its earnings guidance to the range $2.60-$2.70 from
In addition, West Pharmaceuticals recently announced a 1% increase
in its quarterly cash dividend to 19 cents from the fourth quarter
of 2012. This represents the company's 19th consecutive annual
dividend hike. We believe West Pharmaceuticals' commitment to
deliver incremental returns to shareholders along with reliable
operating cash flow should support research and development
(R&D) as well as capital spending.
Further, we are also impressed by the company's initiatives to
expand its products portfolio via innovative product launches and
strategic alliances. West Pharmaceuticals recently launched its
B.safe syringe safety system to meet the increasing market demand
for safety systems.
Moreover, in September 2012, the company inked an agreement with
Janssen Biotech, Inc. to develop and manufacture a leading-edge
self-injection, SelfDose. The collaboration will enable the company
to enhance its existing portfolio of self-injection technology as
SelfDose complements West's ConfiDose and SmartDose injection
In addition, West Pharmaceuticals' expanding global footprint and
diversified customer base lends it a competitive edge in the
injectable drug delivery market. Its strategy to penetrate emerging
markets is a major growth driver. The company opened two new plants
in China and India in an effort to meet the dynamic and burgeoning
market demand, especially in the Asia-Pacific region. However,
macroeconomic pressure across the globe remains a headwind.
Earnings Estimate Revision
The Zacks Consensus Estimate for 2012 increased approximately 0.7%
to $2.67 per share over the last 60 days. The current estimate
implies year-over-year growth of 14.70%.
For 2013, the Zacks Consensus Estimate rose by 2.1% over the same
time frame to $2.91 per share, implying year-over-year growth of
West Pharmaceuticals currently trades at a forward P/E of 20.24x, a
7.3% premium to the peer group average of 18.86x. The price-to-book
ratio of 2.70x represents a 8.4% premium to the peer group average
of 2.49x. The company's strong fundamentals justify the premium
valuation of the stock.
The company has a 12-month ROE of 14.3%, which is in line with the
peer group average.
About the Company
Pennsylvania-based West Pharmaceuticals is a global leader in the
provision of drug administration systems and components for
packaging as well as delivery of injectable drugs and delivery
system components across various industries. With a market cap of
$1.84 billion and 6,300 full-time employees, the company operates
from 50 locations across continents.
West Pharmaceutical, which competes with
) in certain niches, currently has a short-term Zacks #2 Rank (Buy