West Pharmaceutical Services (WST -5.59%), a global manufacturer of drug packaging and delivery systems for the pharmaceutical and healthcare industries, reported Q2 2025 earnings on July 24, 2025. The key news was a significant beat on both GAAP revenue and non-GAAP EPS. Adjusted earnings per share (EPS) were $1.84, outpacing the $1.51 analyst estimate (non-GAAP). Revenue reached $766.5 million, surpassing GAAP expectations of $726.1 million. Management also raised its full-year 2025 outlook for both net sales and adjusted diluted earnings per share. Overall, the quarter was marked by broad-based growth, margin improvement, and strong customer demand for the company’s proprietary products.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.84 | $1.51 | $1.52 | 21.1% |
| Revenue | $766.5 million | $726.1 million | $702.1 million | 9.2% |
| Revenue – Proprietary Products | $619.8 million | $559.7 million | 10.7% | |
| Revenue – Contract-Manufactured Products | $146.7 million | $142.4 million | 3.0% | |
| Adjusted Operating Profit Margin | 20.3% | 17.7% | 2.6 pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Success Factors
West Pharmaceutical Services develops packaging and delivery systems used in the storage and administration of injectable drugs. Its products range from rubber stoppers and seals for vials, to advanced auto-injectors and wearable drug delivery devices for complex therapies. The company’s customer base includes biotech, pharmaceutical, and generic drug makers across the globe.
Recently, the business has focused on expanding its portfolio of proprietary (internally developed and patented) products and investing in manufacturing automation. Key factors for success include continuing innovation, delivering quality and regulatory-compliant products, and maintaining robust supply chains across its worldwide manufacturing footprint. In FY2024, international markets accounted for 57.5% of West’s total net sales, underlining the importance of its global reach.
Quarter in Review: Sales and Operations
The quarter’s results reflected outperformance in both GAAP revenue and non-GAAP profit margins. Proprietary Products sales—comprising specialty components and drug delivery devices—rose 10.7% year-over-year on a GAAP basis. High-Value Product (HVP) components, such as Westar and NovaChoice elastomer parts for injectable drugs, made up 47% of total sales and grew 11.3%. Revenue from HVP Delivery Devices, which includes Daikyo Crystal Zenith polymer devices and Administration Systems for injectable biologics, jumped by 30.0% and now accounts for 13% of company net sales.
Growth in these advanced product lines was supported by ongoing customer conversions related to European pharmaceutical regulations (known as Annex 1), which require stricter standards on drug containment and have led customers to adopt higher-margin, technologically advanced components. In management’s words, this “ongoing momentum in HVP conversion mainly related to Annex 1 projects and the continued normalization of customer ordering patterns” fueled strong performance. Standard Products, which are less complex components, increased by 0.4%, contributing 21% to total sales.
Contract-Manufactured Products, which includes devices made for external customers such as self-injection pens for diabetes and obesity treatments (specifically glucagon-like peptide-1, or GLP-1, therapies), experienced a sales increase of 3.0%. However, growth in this segment was partially offset by the tapering of healthcare diagnostics contracts, particularly in continuous glucose monitoring. Management also noted supply chain constraints at a key plant in Q1 FY2025, temporarily limiting the ability to fully meet surging demand for high-value products; this restriction is expected to ease in the second half of the year.
The company delivered broad improvement across profitability metrics, with adjusted operating profit margin (non-GAAP) expanding by 0.2 percentage points in Q1 2025 versus the prior year. Margin gains came from a mix shift toward higher-value products. The company reported a gross profit margin of 35.7%, up from 32.8% in Q2 2024. Management stated that “The improved performance was concentrated in higher margin products, which drove strong margin expansion.”
Quality assurance and regulatory compliance remain central to West’s strategy. Customer conversions triggered by Annex 1 continue to offer an uplift as clients opt for high-tech packaging solutions. Meanwhile, capital expenditures have moderated year to date, and automation—such as the first automated SmartDose line, a wearable drug infusion device—remains a focus for future cost efficiencies.
From a capital allocation perspective, West generated $306.5 million in operating cash flow in the first half of FY2025, and repurchased $134.0 million in shares at an average price of $242.55 per share during the first six months of 2025. Free cash flow almost doubled in the first six months of 2025 versus the same period in 2024. At the operational level, inventory and working capital increased.
Several external factors shaped the outlook for the rest of the year. The company factored in an estimated $15–$20 million tariff-related headwind, with possible mitigation if customer pass-through pricing is achieved. Foreign currency tailwinds added $59 million in sales and $0.27 to adjusted diluted EPS guidance for FY2025. Ongoing management turnover and the completion of most restructuring initiatives add further context to West’s near-term strategic environment. The company announced a fourth-quarter 2025 dividend of $0.22 per share.
Looking Ahead: Management Guidance and Watchpoints
West raised its full-year FY2025 guidance, now forecasting net sales between $3.040 billion and $3.060 billion and adjusted diluted EPS between $6.65 and $6.85. This marks a notable increase from previous guidance, which stood at $2.945–$2.975 billion for net sales and $6.15–$6.35 for adjusted diluted EPS. The updated forecast anticipates organic net sales growth of roughly 3% to 3.75% for FY2025 with a foreign exchange benefit and tariff costs fully incorporated in adjusted diluted EPS guidance. Guidance assumes a tax rate of about 21% and capital spending at $275 million for the year.
Key watchpoints for investors in the upcoming quarters include the resolution of temporary supply chain constraints, the trajectory of SmartDose device profitability as new automated capacity comes online, and the outcome of ongoing negotiations regarding tariff mitigation and price pass-through. Investors should also watch for the pace and impact of further regulatory-driven conversions in the proprietary products franchise and continued management transitions.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
