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WEST PHARMACEUTICAL SERVICES INC (WST)·Q3 2025 Earnings Summary

Executive Summary

  • West delivered a solid quarter with net sales of $804.6M (+7.7% reported, +5.0% organic), adjusted diluted EPS of $1.96 (+5.9% YoY), and gross margin up 120 bps to 36.6%, driven by double‑digit growth in High‑Value Product (HVP) Components and favorable mix .
  • Results beat Wall Street consensus: revenue $804.6M vs $789.9M*, adjusted EPS $1.96 vs $1.711*, with 11 revenue and 12 EPS estimates; West raised FY25 revenue and EPS guidance . Values retrieved from S&P Global*.
  • Guidance increased: FY25 revenue to $3.060–$3.070B (was $3.040–$3.060B), organic growth to 3.75–4.0% (was 3.0–3.75%), and adjusted EPS to $7.06–$7.11 (was $6.65–$6.85); Q4 revenue guided to $790–$800M and adjusted EPS to $1.81–$1.86 .
  • Key catalysts: sustained HVP components momentum (GLP‑1s, Annex 1 upgrades), margin expansion initiatives, and addition of drug handling capability in Dublin in early 2026 (offsetting CGM exit); management reiterated confidence in mitigating tariff impacts by 2026 .

What Went Well and What Went Wrong

What Went Well

  • Double‑digit growth in HVP Components: $390.0M (+16.3% reported, +13.3% organic), fuelled by GLP‑1 elastomers (9% of total company revenue) and Annex 1 conversions; management: “We achieved double-digit growth in our HVP Components business...” .
  • Gross margin expanded 120 bps YoY to 36.6% from favorable HVP mix and supply network execution; CFO: “Gross margin was 36.6%… up 120 bps… due to positive mix of HVP components” .
  • Raised FY25 guidance on both revenue and EPS; CEO: “As a result of the solid performance… we are again increasing our full-year guidance expectations” .

What Went Wrong

  • HVP Delivery Devices down 15.7% YoY (−16.7% organic) due to a ~$19M prior‑year incentive fee; delivery devices gross margin/headwinds persist as SmartDose economics improve sequentially but remain dilutive until automation in early 2026 .
  • Contract Manufacturing (CM) margins compressed: gross margin 19.3% (−60 bps), OP margin 14.2% (−80 bps) amid mix and CGM contract lifecycle; management reallocating Arizona capacity and ramping Dublin; margins expected to improve with drug handling in 2026 .
  • Tariff costs estimated $15–$20M in 2025; mitigation underway (network optimization, customer pass‑throughs), full mitigation targeted by 2026; prudence evident in Q4 organic growth guide (1.0–2.3%) .

Financial Results

Performance vs prior periods and estimates

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$746.9 $766.5 $804.6
Diluted EPS (Reported) ($)$1.85 $1.82 $1.92
Adjusted Diluted EPS ($)$1.85 $1.84 $1.96
Gross Margin (%)35.4% 35.7% 36.6%
EBIT (Operating) Margin (%)21.6% (reported) 20.1% (reported) 20.8% (reported) / 21.1% (adjusted)
Net Income ($USD Millions)$136.0 $131.8 $140.0

Actual vs Wall Street consensus (Q3 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$789.9*$804.6 +$14.7 (+1.9%)
Adjusted EPS ($)$1.711*$1.96 +$0.249 (+14.6%)
# of Estimates (Revenue / EPS)11 / 12*——

Values retrieved from S&P Global*.

Segment and product breakdown (Q3 2025)

CategoryRevenue ($M)YoY %Organic %Gross Margin %OP Margin %Share of Total
Proprietary Products$647.5 +7.7% +5.1% 40.8% 27.1% 80%
Contract-Manufactured$157.1 +8.0% +4.9% 19.3% 14.2% 20%
HVP Components$390.0 +16.3% +13.3% ——48%
HVP Delivery Devices$99.1 −15.7% −16.7% ——12%
Standard Products$158.4 +6.7% +3.6% ——20%

KPIs (Q3 year-to-date where noted)

KPIValue
GLP‑1 share of total company net sales (Q3)17% total (9% elastomers, 8% CM)
Annex 1 upgrade projects (active)375 projects; expected ~200 bps FY25 sales uplift
Operating cash flow (9M25)$503.7M (+8.7% YoY)
Capital expenditures (9M25)$209.8M (−22.9% YoY)
Free cash flow (9M25)$293.9M (+53.7% YoY)
Share repurchases (9M25)552,593 shares; $134.0M at $242.55 avg price

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY2025$3.040–$3.060 $3.060–$3.070 Raised
Organic Revenue Growth (%)FY20253.0–3.75 3.75–4.0 Raised
FX impact on Revenue ($M)FY2025~$59M tailwind ~$59M tailwind Maintained
Adjusted Diluted EPS ($)FY2025$6.65–$6.85 $7.06–$7.11 Raised
FX impact on Adjusted EPS ($)FY2025+$0.27 +$0.27 Maintained
SBC Tax Benefit included ($)FY2025$0.04 through 1H25 $0.05 through 9M25 Raised (timing)
Capital Expenditures ($M)FY2025$275 $275 Maintained
Revenue ($M)Q4 2025—$790–$800 Introduced
Organic Revenue Growth (%)Q4 2025—1.0–2.3 Introduced
FX impact on Revenue ($M)Q4 2025—~$35 Introduced
Adjusted Diluted EPS ($)Q4 2025—$1.81–$1.86 Introduced
Assumed Tax Rate (%)Q4 2025—~21 Introduced
Dividend ($/share)Q4 2025$0.22 (announced on 7/24) —Previously announced (no update in Q3)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
HVP Components momentumQ1: mid‑single digit FY growth, constraint at one EU HVP plant; Q2: +11.3% organic, mid‑to‑high single‑digit FY growth, improving capacity Q3: +13.3% organic; low‑ to mid‑teens built into Q4; sequential profitability improvement Accelerating
GLP‑1 exposureQ1: ~7% total rev (elastomers); Q2: 8% of total; ramp leveraging COVID HVP capacity Q3: 9% elastomers + 8% CM = 17% total; growth broadly aligned with end market; pipeline/clinical participation Increasing share
Annex 1 conversionsQ1: ~200 bps revenue, ~340 projects; Q2: 370 projects Q3: 375 projects; ~200 bps FY25 uplift; <40% converted to commercial to date Sustained multi‑year
SmartDose economics/automationQ1: sequential improvement; automation late 2025/early 2026; all options on table Q3: <4% of rev; automation go‑live early 2026; sequential margin improvement Improving, transition
Contract Manufacturing (Dublin, CGM)Q1: GLP‑1 auto‑injector ramp; drug handling targeted; CGM exits; low‑single‑digit FY growth Q3: Dublin ramp continues; drug handling commercialization early 2026 (~$20M 2026); CGM exit mid‑2026 with ~$40M 2H headwind; backfill pipeline active Transitioning, backfill
Tariffs/MacroQ1: 2025 tariff net impact $20–$25M; mitigation levers (pass‑throughs, regionalization) Q3: 2025 tariff $15–$20M; >50% mitigated in 2025, fully mitigated in 2026; no demand pull‑forward observed Improving mitigation
Supply chain / network optimizationQ1: centers of excellence; tech transfers 12–18 months; regionalization benefits Q3: adding labor, equipment in Germany; potential consolidation; local‑for‑local advantages Ongoing optimization
PricingQ1: FY price contribution lighter than prior estimate; Q2: ~2.1 pp price contribution Q3: price +1.7% in quarter; ~2.4% YTD; aligns with 2–3% expectation Stable within range
CapEx normalizationQ1: target 6–8% of sales going forward Q3: 2025 capex $275M; path to lower % of sales, concentrated in HVP Normalizing down

Management Commentary

  • “We achieved double-digit growth in our HVP Components business, driven by our continued execution in GLP-1 products, increased HVP conversion, including Annex 1.” — Eric M. Green, CEO .
  • “Gross margin was 36.6%… up 120 basis points… due to the positive mix of HVP components, as well as good execution in our supply network.” — Bob McMahon, CFO .
  • “Actually built into our Q4 guidance is low to mid-teens [HVP components growth]. That momentum we’re expecting to continue.” — Bob McMahon, CFO .
  • “We continue to expect the second CGM contract to conclude at the end of Q2 2026… roughly a $40 million headwind for the second half of 2026… building out drug handling… expected to add roughly $20 million in revenue for next year.” — Bob McMahon, CFO .
  • “We are anticipating… tariff-related costs this year and now expect to mitigate more than half… in 2025. For 2026, we expect to fully mitigate.” — Bob McMahon, CFO .

Q&A Highlights

  • HVP components sustainability: management anticipates low‑ to mid‑teens growth in Q4 and durable multi‑year drivers (GLP‑1s, Annex 1 upgrades); margin expansion expected via gross margin leverage and efficiencies .
  • CGM contract exit backfill: active late‑stage customer discussions; expected transition revenues and healthier economics; commercial operations toward end of 2026 .
  • GLP‑1 growth vs market: West’s GLP‑1 growth reflects broader factors beyond scripts (vial usage, clinical participation, generics, geographies), with healthy growth expected to continue .
  • Guidance prudence: Q4 guidance bumped by magnitude of Q3 beat; no evidence of pull‑forward; emphasis on transparency amid dynamic markets .
  • Network optimization & CapEx: bias to local‑for‑local manufacturing; tech transfers (12–18 months) to mitigate tariffs; capex trending down as % of sales, concentrated in HVP .

Estimates Context

  • Q3 2025 actuals vs consensus: revenue $804.6M vs $789.9M*; adjusted EPS $1.96 vs $1.711*; # of estimates: revenue 11, EPS 12*. Values retrieved from S&P Global*.
  • Implication: Street likely to raise FY25 EPS and revenue models on higher HVP mix, FX tailwind stability (+$59M; +$0.27 to EPS), and Q4 guide implying continued momentum despite incentive fee headwinds .

Key Takeaways for Investors

  • HVP components are the core engine; double‑digit growth and mix lift to margins underpin the FY25 guidance raise and Q4 outlook .
  • GLP‑1 exposure is meaningful (17% of total), diversified across elastomers and CM, with pipeline/clinical breadth suggesting sustained growth into 2026 .
  • Annex 1 is a multi‑year structural tailwind; project backlog (375) and ~200 bps FY25 uplift should continue to drive HVP conversions and margin mix .
  • Delivery devices remain a work‑in‑progress; SmartDose margins improving sequentially with automation in early 2026; economics inflect thereafter .
  • CM portfolio is repositioning: Dublin drug handling ramps in 2026 ($20M), offsetting CGM exit ($40M 2H26 headwind); watch for backfill announcements .
  • Tariff risks are being actively mitigated (network optimization, customer pass‑throughs); management targets full mitigation by 2026, reducing an overhang .
  • Near‑term trading lens: positive beat/raise dynamic and HVP momentum vs known Q4 incentive fee comp headwind; medium term thesis anchored in HVP mix, Annex 1, and GLP‑1 durability .
Non‑GAAP note: Adjusted EPS reconciles reported $1.92 to $1.96 via $0.03 restructuring and $0.01 amortization adjustments **[105770_0000105770-25-000090_a3q25earningspresentatio.htm:3]** **[105770_0000105770-25-000090_exh991q32025earningsrelease.htm:4]**.