Results: West Pharmaceutical Services Exceeded Expectations And The Consensus Has Updated Its Estimates
It's been a good week for West Pharmaceutical Services (NYSE:WST) shareholders, because the company has just released its latest full-year results, and the shares gained 9.7% to US$175. West Pharmaceutical Services reported US$1.8b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$3.21 beat expectations, being 5.4% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
View our latest analysis for West Pharmaceutical Services
After the latest results, the five analysts covering West Pharmaceutical Services are now predicting revenues of US$1.96b in 2020. If met, this would reflect a credible 6.7% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to increase 7.7% to US$3.52. In the lead-up to this report, analysts had been modelling revenues of US$1.95b and earnings per share (EPS) of US$3.42 in 2020. So the consensus seems to have become somewhat more optimistic on West Pharmaceutical Services's earnings potential following these results.
Analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 13% to US$169. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on West Pharmaceutical Services, with the most bullish analyst valuing it at US$185 and the most bearish at US$145 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the West Pharmaceutical Services's past performance and to peers in the same market. We can infer from the latest estimates that analysts are expecting a continuation of West Pharmaceutical Services's historical trends, as next year's forecast 6.7% revenue growth is roughly in line with 5.9% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the are forecast to see their revenues grow 7.9% per year. So although West Pharmaceutical Services is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider market.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards West Pharmaceutical Services following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple West Pharmaceutical Services analysts - going out to 2024, and you can see them free on our platform here.
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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