Zoetis' (ZTS) Q3 Earnings Beat, Revenues Miss by a Whisker
Zoetis Inc. ZTS delivered third-quarter 2023 adjusted earnings (excluding one-time items) of $1.36 per share, which beat the Zacks Consensus Estimate of $1.35 per share. In the year-ago quarter, the company had delivered earnings of $1.21 per share.
Total revenues grew 7% year over year to $2.151 billion. Revenues fell marginally short of the Zacks Consensus Estimate of $2.168 billion.
Quarterly Highlights
Zoetis derives the majority of its revenues from a diversified product portfolio of medicines and vaccines used to treat and protect livestock and companion animals. The company reports business results under two geographical operating segments — the United States and International.
Revenues from the U.S. segment increased 8% year over year to $1.174 billion in the third quarter, beating the Zacks Consensus Estimate of $1.170 billion. The reported figure beat our estimate of $1.158 billion.
Sales of companion animal products in the U.S. region rose 11% from the prior-year quarter’s level due to increased sales of the company’s key dermatology portfolio, including Apoquel, Cytopoint as well as parasiticide product Simparica Trio. Growth in the sales of Zoetis’ vaccine portfolio and Solensia, a monoclonal antibody product for osteoarthritis pain in cats, also contributed to the increased revenues in the third quarter.
However, sales of livestock products declined 2% year over year in the reported quarter due to a decline in cattle product sales. Swine products too witnessed a decline in sales due to lower disease prevalence.
Revenues from poultry products increased, driven by growth in the sales of vaccines and medicated feed additives.
Shares of Zoetis have gained 3.3% in the year-to-date period against the industry’s 18.2% decline.
Image Source: Zacks Investment Research
Revenues in the International segment improved 8% year over year, both on a reported basis and operational basis, to $956 million in the third quarter, missing the Zacks Consensus Estimate of $975 million. The reported figure missed our model estimate of $992.9 million.
Sales of companion animal products grew 12% both on a reported basis and an operational basis, driven by growth in several key products. These include monoclonal antibody products for osteoarthritis pain — Librela for dogs and Solensia for cats — and dermatology products — Apoquel and Cytopoint as well as Simparica Trio.
On a year-over-year basis, livestock product sales grew 3% on a reported basis and 5% operationally. Growth in the cattle portfolio was driven by price, improved supply and favorable market conditions in Brazil.
In the third quarter, poultry products price increased across the international segment.
Swine product sales grew primarily as a result of demand in key and emerging markets.
2023 Financial Guidance
Zoetis updated its previously issued guidance for 2023.
Revenues are now projected in the range of $8.475 to $8.550 billion (previously expected between $8.500-$8.650 billion), adjusting the impact of foreign exchange rates. The operational growth guidance was narrowed to 6.5-7.5% from the earlier band of 6-8%.
The company now expects adjusted earnings per share in the band of $5.38 to $5.43 (previously $5.37-$5.47 per share) for full-year 2023.
Our Take
Zoetis’ third-quarter earnings beat estimates while revenues marginally missed the same. The bottom-line performance can be attributed to the strong uptake of companion animal products. ZTS expects to continue witnessing growth due to the consistent strength of the pet care portfolio, key dermatology products and its efforts to penetrate new markets.
Zoetis Inc. Price, Consensus and EPS Surprise
Zoetis Inc. price-consensus-eps-surprise-chart | Zoetis Inc. Quote
Zacks Rank & Stocks to Consider
Zoetis currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the healthcare sector are Dynavax Technologies Corporation DVAX, MEI Pharma, Inc. MEIP and Ligand Pharmaceuticals Incorporated LGND, sporting a Zacks Rank #1 (Strong Buy) each.You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, estimates for Dynavax Technologies’ 2023 loss per share have narrowed from 24 cents to 22 cents. Meanwhile, during the same period, earnings per share estimates for 2024 have improved from 2 cents to 8 cents. Year to date, shares of DVAX have rallied 32.4%.
Earnings of Dynavax Technologies beat estimates in two of the last four quarters while missing the same on the remaining two occasions. DVAX delivered a four-quarter average earnings surprise of 25.78%.
In the past 60 days, estimates for MEI Pharma’s 2023 loss per share have improved from $6.54 to $4.89. During the same period, loss per share estimates for 2024 have narrowed from $5.14 to $4.02. Year to date, shares of MEIP have rallied 44.1%.
Earnings of MEI Pharma beat estimates in three of the trailing four quarters and met the same on the other occasion. On average, MEIP came up with a four-quarter earnings surprise of 53.58%.
In the past 60 days, Ligand Pharmaceuticals’ earnings per share estimates for 2023 have improved from $4.98 to $5.10. During the same period, earnings per share estimates for 2024 have moved up from $4.26 to $4.59. Year to date, shares of LGND have lost 20.2%.
Earnings of Ligand Pharmaceuticals beat estimates in three of the trailing four quarters and missed the same on the other occasion. On average, LGND came up with a four-quarter earnings surprise of 52.47%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Dynavax Technologies Corporation (DVAX) : Free Stock Analysis Report
Ligand Pharmaceuticals Incorporated (LGND) : Free Stock Analysis Report
Zoetis Inc. (ZTS) : Free Stock Analysis Report
MEI Pharma, Inc. (MEIP) : Free Stock Analysis Report
