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West Pharmaceutical Earnings: Disappointing Performance; Guidance Revised Down; Shares Undervalued
Wide-moat West Pharmaceuticals’ second quarter was disappointing. In addition to continued year-on-year declines in revenue for the three months, the company revised its full-year guidance downward due to the ongoing effects of customer destocking. However, we think West's long-term story remains intact including growth drivers of increasing biologics sales, GLP-1 obesity drug sales, and regulatory pressures pushing customers toward higher-quality packaging solutions. We are maintaining our fair value estimate of $336 per share and view the stock as modestly undervalued after the selloff.