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Zoetis' (ZTS) Q2 Earnings and Revenues Surpass Estimates

Zacks Equity Research
·4 mins read

Zoetis Inc. ZTS posted second-quarter 2020 adjusted earnings of 89 cents per share (excluding one-time items), which was lower than the year-ago quarter’s earnings of 90 cents but beat the Zacks Consensus Estimate of 66 cents.

Total revenues were flat year over year at $1.55 billion, which beat the Zacks Consensus Estimate of $1.36 billion.

Shares of Zoetis have increased 23% so far this year against the industry's decline of 3.8%.

Quarterly Highlights

Zoetis reports business results under two geographical operating segments — the United States and International. It has a diverse portfolio of products for livestock and companion animals.

Revenues from the United States segment increased 6% year over year to $823 million. Sales of companion animal products in this region grew 19%, primarily owing to higher sales of the Simparica franchise, including some initial stocks of the new triple-combination parasiticide, Simparica Trio. Apoquel and Cytopoint brands in the dermatology portfolio also led to this increase. However, sales of livestock products decreased 18% in the quarter.. Disruptions in the food supply chain, including reduced producer processing capacity and continued channel migration, were also reasons behindthe decline.The decline in the cattle portfolio was also the result of continued unfavorable market conditions in beef and dairy, while swine product sales were negatively impacted by increased competition

Revenues inthe International segment decreased 5% year over year on a reported basis (up 3% operationally) to $708 million. Livestock sales dropped 5% (up4% operationally) in the quarter.Notably, sales of swine products surged as a result of expanding herd production and beefed-up biosecurity measures in the wake of the African Swine Fever in China. Alpha Flux, a recently-launched parasiticide, was the primary driver of growth in fish. Sales of cattle products declined in the quarter due to the impact of COVID-19 in certain markets as well as the discontinuation of non-core products in Brazil.

Sales of companion animal products declined 3% on a reported basisand grew 2% on an operational basis. Sales of companion animal products in China continued to grow rapidly, driven by strong underlying market dynamics. Growth in companion animal products was partially offset by the impact of COVID-19 and social-distancing measures in certain EU markets and Latin America, including Brazil. This resulted in decreased veterinary clinic traffic.

2020 Guidance

Zoetis updated its full year 2020 guidance

The company now expects adjusted earnings of $3.52-$3.68 per share,compared with the previous guidance of $3.17-$3.42 per share.

Revenues are now projected between $6.300 billion and $6.475 billion, raised from the previous range of$5.950-$6.250 billion.

The guidance takes into account the foreign exchange rates of mid-July.

Other Updates

In July, the company acquired Fish Vet Group as a strategic addition to its Pharmaq business, which develops and commercializes fish vaccines and offers services in vaccination and diagnostics for aquaculture.

Our Take

Zoetis’ exceeded second-quarter earnings and sales estimates driven by strong companion animal portfolio. The company expects its overall revenue growth for the remainder of the year to be driven largely by companion animal products, especially parasiticides and its key dermatology portfolio. It raised the 2020guidance.

Zacks Rank & Stocks to Consider

Zoetis currently carries a Zacks Rank #3 (Hold). Some top-ranked stocks in the healthcare sector includeAC IMMUNE SA. ACIU, Emergent Biosolutions Inc. EBS and Alimera Sceinces Inc. ALIM, all carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AC IMMUNE’s loss per share estimates have narrowed from 92 cents to 90 cents for 2020 over the past 60 days.

Emergent’s earnings estimates have increased from $2.85 to $5.60 for 2020 and from $3.35 to $6.67 for 2021 over the past 60 days.

Alimera’s loss per share estimates have narrowed from $2.33 to $1.31 for 2020 and from 63 cents to 52 cents for 2021 over the past 60 days.


Zoetis Inc. Price, Consensus and EPS Surprise

Zoetis Inc. Price, Consensus and EPS Surprise
Zoetis Inc. Price, Consensus and EPS Surprise

Zoetis Inc. price-consensus-eps-surprise-chart | Zoetis Inc. Quote

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