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West Pharmaceutical Services(WST-N)

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Why West Pharmaceutical Services Stock Is Heading South Today

Motley Fool - Thu Oct 27, 2022

What happened

Shares of West Pharmaceutical Services(NYSE: WST) were down 11.7% as of 11:14 a.m. ET on Thursday. The decline came after the company announced its third-quarter results and provided its full-year 2022 guidance earlier in the day.

West reported Q3 net sales of $686.9 million, down 2.8% year over year. This result was well below the consensus Wall Street revenue estimate of $730.9 million. The company announced adjusted diluted earnings per share (EPS) of $2.03, a 1.5% decline from the prior-year period. This also came in below the average analyst earnings estimate of $2.12 per share.

In addition, West lowered its full-year guidance for 2022. It now expects net sales will be between $2.83 billion and $2.84 billion compared to the previous forecast of $2.95 billion to $2.975 billion. West projects adjusted diluted EPS of $8.15 to $8.20. The company's prior outlook was for adjusted EPS between $9 and $9.15.

So what

Anytime a company misses Wall Street expectations and cuts its guidance, it's a foregone conclusion that its share price will fall. West did both today, so the double-digit percentage drop for the healthcare stock isn't surprising.

There are several primary culprits behind West's disappointing Q3 results. The demand for COVID-19 products continued to fall. CEO Eric Green also noted that the company has experienced delays with its expansion projects, issues related to the timing of customer deliveries, and lower productivity related to shifting product mix.

Now what

West Pharmaceutical Services gave investors some positive news in its Q3 update. Green stated that the company expects the issues that negatively impacted its performance to be resolved in early 2023. As a result, West believes that it will return to overall organic net sales growth next year.

Also, the company's board of directors approved a 5.6% dividend increase to be paid on Nov. 16. This marks the 30th consecutive annual dividend hike for West.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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