Why Did West Pharmaceutical Services Stock Drop Almost 40%?
West Pharmaceutical Services (NYSE:WST), a global solutions provider for drugs, biologics, gene therapies, and consumer healthcare products, recently released its Q4 results, with revenues and earnings exceeding the street estimates. It reported sales of $749 million and adjusted earnings of $1.82 per share, compared to $740 million and $1.73, respectively. However, its outlook fell short of expectations, weighing on its stock post the results announcement.
WST stock, with -43% returns since the beginning of 2024, has underperformed the S&P 500 index, up 28%. A weakness in the company’s generics and biologics businesses has weighed on its stock price growth lately. But, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

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West Pharmaceutical Services’ revenue of $749 million was up 2.3% y-o-y in Q4. The company’s proprietary products sales (PPS) were up 3.4%, while contract-manufactured products (CMP) sales were down 2.5%. CMP sales were impacted by a decline in healthcare diagnostics devices, while PPS sales were driven by an increase in self-injection device platforms.
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The company also saw a 150 bps fall in gross profit margin to 36.5% and a modest 10 bps decline in operating margin to 21.7%. This impacted the earnings, which came in at $1.82 per share, versus $1.83 per share in the prior-year quarter. Looking forward, West Pharmaceutical expects its sales to be $2.89 billion and adjusted earnings of $6.10 per share in 2025. This is lower than the street expectations of $3.04 billion and $7.44, respectively.
Turning to WST stock, it plunged 38% following the results announcement, owing to its downbeat guidance. Even if we look at a slightly longer period, the changes in WST stock have been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 66% in 2021, -50% in 2022, 50% in 2023, and -7% in 2024.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile, and it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could WST face a similar situation as it did in 2022 and 2024 and underperform the S&P over the next 12 months — or will it see a recovery? After its recent fall, we think WST stock is now undervalued. Why?
At its current levels of around $200, WST stock is trading at just 5.1x trailing revenues, compared to the stock’s average P/S ratio of 9.2x over the last five years. While reduced profit margins and conservative guidance justify some multiple compression, we think that the stock appears oversold at current levels, offering compelling value for investors.
While WST stock looks undervalued, it is helpful to see how West Pharmaceutical Services’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Returns | Feb 2025 MTD [1] |
Since start of 2024 [1] |
2017-25 Total [2] |
WST Return | -42% | -43% | 142% |
S&P 500 Return | 1% | 28% | 173% |
Trefis Reinforced Value Portfolio | -1% | 22% | 726% |
[1] Returns as of 2/14/2025
[2] Cumulative total returns since the end of 2016
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