A month has gone by since the last earnings report for Zoetis (ZTS). Shares have lost about 0.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zoetis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Zoetis Earnings Beat Estimates in Q1, Revenues Miss
Zoetis posted first-quarter 2019 adjusted earnings of 88 cents per share (excluding one-time items), which increased 17% year over year from 75 cents and beat the Zacks Consensus Estimate of 79 cents.
Total revenues rose 7% year over year to $1.46 billion but marginally missed the Zacks Consensus Estimate of $1.47 billion.
The company reports business results under two geographical operating segments — the United States and International. The company has a diverse portfolio of products for livestock and companion animals.
Revenues from the United States segment increased 13% year over year to $718 million. Sales of companion animal products in this region were up 30%, primarily due to higher sales of dermatology portfolio and the acquisition of Abaxis. This was partially offset by lower sales of some livestock products, with declines in cattle and swine more than offsetting growth in poultry.
Revenues at the International segment decreased 1% year over year on a reported basis (up 7% operationally) to $718 million. Livestock sales declined 6% (up 2% operationally) in the quarter due to the negative impact of African Swine Fever in China and the divestiture of certain agribusiness products in Japan. The decline was partially offset by growth across poultry, fish and sheep.
Moreover, sales of companion animal products grew 15% on a reported basis, reflecting higher sales of dermatology portfolio and Simparica. The acquisition of Abaxis also fueled growth.
The company expects adjusted earnings of$3.42-$3.52 per share. Revenues are expected to be $6.100-$6.225 billion, changed from the previous guidance of $6.175-$6.300 billion.
The guidance reflects foreign exchange rates as of late April.
Zoetis received approval of Apoquel (oclacitinib tablet) in China, one of its largest companion animal markets. Other key companion animal products, including Cytopoint (lokivetmab) and Simparica (sarolaner) for dogs, and Revolution Plus (selamectin and sarolaner topical solution) for cats, continued to gain approvals in markets outside the United States.
Core EQ Innovator, the first and only combination vaccine to offer protection against five core equine diseases, was approved in Canada. Under the livestock category, Zoetis launched Clarifide Plus for Jersey cattle in the United States, the first genomic test for this specific breed that provides direct indication of the genetic risk factors for seven of the most common and costly adult cow diseases.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Currently, Zoetis has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Zoetis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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