Why West Pharmaceutical Services Is Rising Today

By Brian Feroldi Markets Fool.com

What happened

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In response to reported upbeat first-quarter earnings, shares ofWest Pharmaceutical Services(NYSE: WST), amanufacturer of pharmaceutical packaging and delivery systems, rose by 10% as of 3:25 p.m. EDT on Thursday.

So what

Here's a look at the key numbers from the quarter that captured the market'sattention:

  • Revenue grew 7.1%, to $387.7 million.
  • Gross profit margin increased 60 basis points, to 34.6%.
  • EPS jumped 52%, to $0.81, when compared to the $0.53 in adjusted earnings per share (EPS) that was recorded in the year-agoperiod. However, it's worth noting that this figure included a one-time tax benefit of $0.21.
  • West Pharmaceutical Servicesspent $27 million on share buybacks during the quarter.

By contrast, Wall Street was only expecting $380.4 million in revenue and $0.55 in EPS, so the company beat estimates on both fronts.

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Image Source: Getty Images.

Turning to guidance, management reaffirmed its full-year revenue projection, which calls for sales to land between$1.585 billion to $1.610 billion. However, the company adjusted its EPS guidance upward to account for the tax benefit. The new EPS guidance range is $2.66 and $2.78, which compares favorably to its prior outlook of $2.45and$2.57.

Given the better-than-expected quarterly results and increased profit guidance, it's easy to understand why the market cheered.

Now what

West Pharmaceutical Services continues to prove that selling stoppers, seals, syringes, and cartridge components to the pharmaceuticalindustry can be a highly lucrative business. The dependable growth in drug demand has provided the company with a strongtailwind that has consistently translated into revenue and profit gains. Given those realities, perhaps it isn't all that surprising to see that the company'sstock has vastly outperformed the red-hot biotech industryover the past five years as measured by the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB).

WST data by YCharts.

Looking ahead, the gradualaging of the global population should ensure that the demand for biologic, generic, and pharmaceutical drugs remains strong for years to come. That's a nice backdrop that provides West Pharmaceutical Services shareholders with plenty of reason to hang on.

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