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What's in Store for West Pharmaceutical's (WST) Q2 Earnings?

West Pharmaceutical Services, Inc. WST is set to report second-quarter 2020 results on Jul 23, before the market opens.

In the last reported quarter, the company reported an earnings surprise of 23.17%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, with the average being 17.99%.

Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

West Pharmaceutical, during first-quarter earnings call in April, confirmed that it registered an upsurge in customer orders for its products, with the growing intensity of the pandemic. Riding on this uptrend, the company’s performance in the beginning of the second quarter was strong and this is likely to have boosted the top line.

Robust organic sales in the first quarter due to strong high-value product sales of the Proprietary Products suite are likely to have continued in the second quarter as well, in turn significantly contributing to revenues. The company maintained its guidance for organic sales growth at 8% compared with the prior expectation of 7-8%.

West Pharmaceutical Services, Inc. Price and EPS Surprise

West Pharmaceutical Services, Inc. Price and EPS Surprise

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

The company observed during the second quarter that it was presented with new opportunities from companies looking to develop COVID-19 solutions. This is likely to have generated more sales for the company in the second quarter and driven the top line.

Persistent collaborations with biotech and biopharma customers who are using West Pharmaceutical's and Daikyo's high-value product offerings are likely to have favored the stock in the to-be-reported quarter. The company’s Biologics market unit is anticipated to have continued its strong performance in the second quarter as well.

In the first quarter, the Generics market unit saw strength on robust sales of Westar and FluroTec components. The Pharma market unit was driven by sales of high-value products and services including Westar, NovaPure and FluroTec components. Contract Manufacturing’s strong organic sales growth was led by sales of diagnostic and health care-related injection systems. The momentum of the three units is likely to have continued in the second quarter and significantly boosted the top line.

For the full year, the company maintained its view for net sales in the range of $1.95 billion-$1.97 billion. Notably, the net sales guidance includes an estimated full-year headwind of $26 million for full-year 2020 based on current foreign exchange rates compared with the prior expectation of $15 million.

West Pharmaceutical now projects 2020 adjusted earnings per share within $3.52-$3.62 compared with the earlier guidance range of $3.45-$3.55. The EPS guidance includes an estimated headwind of 7 cents based on current foreign currency exchange rates compared with the prior projection of 4 cents.

Notably, the revised guidance includes a 7 cents EPS impact from first-quarter tax benefits from stock-based compensation. For the rest of the year, the EPS guidance assumes a tax rate of 24% and does not include potential tax benefits from stock-based compensation.

The Estimate Picture

The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $493.2 million, indicating growth of 5% from the year-ago reported figure. The same for the bottom line is 88 cents per share, suggesting fall of 1.1% from the year-ago quarter.

What Our Model Suggests

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

Zacks Rank: The company currently carries a Zacks Rank #2.

Earnings ESP: West Pharmaceutical has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation EXAS has an Earnings ESP of +23.14% and a Zacks Rank of 2 at present.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +14.37% and is a Zacks #1 Ranked stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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