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Zoetis (ZTS) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Zoetis Inc. ZTS is slated to report second-quarter 2019 results on Aug 6, before market open.

The company has an excellent earnings surprise history, surpassing expectations in the trailing four quarters with average positive earnings surprise of 7.56%.

Zoetis’ share price has rallied 35% in the past year compared with the industry’s growth of 6.6%.

 

Let's see how things are shaping up for this announcement.

Factors to Consider

Zoetis derives a 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.

The company did not provide any quarterly guidance. Revenues are expected to be $6.100-$6.225 billion for 2019. 

Solid sales from the dermatology portfolio and the Abaxis acquisition strengthened the Unites States segment in the first quarter, with the trend expected to continue in the second quarter as well. The company’s companion animal business has been performing well.

Apoquel and other product launches continue to drive growth in the companion animal portfolio. Key dermatology products like Apoquel and Cytopoint, new products such as Simparica and Stronghold Plus, and increased medicalization rates in key international markets such as China and Brazil should drive growth further.

In July 2018, the company completed the acquisition of California-based Abaxis to augment presence in the animal health diagnostics market, which is a fast-growing portion of the animal health industry. This is anticipated to significantly contribute to sales.

Zoetis received approval for Apoquel in China, one of its largest companion animal markets. Other key companion animal products, including Cytopoint and Simparica for dogs, and Revolution Plus (selamectin and sarolaner topical solution) for cats, gained approvals in markets outside the United States in the first quarter, which should lead to incremental revenues in the second quarter.

Earlier this month, Zoetis inked an agreement to acquire Platinum Performance, a privately held, nutrition-focused animal health company. The financial terms of the agreement were not disclosed.

We expect the company to throw more light on other pipeline updates along with the upcoming quarterly results.

What Our Model Indicates

Our proven model does not conclusively show that Zoetis is likely to beat on earnings in the to-be-reported quarter. This is because the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. But that is not the case here, as you will see below.

Earnings ESP: Zoetis has an Earnings ESP of -2.10%, as the Zacks Consensus Estimate is pegged at 82 cents, while the Most Accurate Estimate is pegged at 80 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive Earnings ESP to be confident of an earnings beat.

Note that Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement are best avoided.

Zoetis Inc. Price, Consensus and EPS Surprise

Zoetis Inc. Price, Consensus and EPS Surprise

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

 

Stocks That Warrant a Look

Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Incyte Corp. INCY has an Earnings ESP of +3.73% and a Zacks Rank of 2. The company is scheduled to release second-quarter results on Jul 30, before market open. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences, Inc. GILD is scheduled to release second-quarter results on Jul 30, after market close. The company has an Earnings ESP of +2.41% and a Zacks Rank #2.

Regeneron Pharmaceuticals, Inc. REGN has a Zacks Rank #3 and an Earnings ESP of +6.25%. The company is scheduled to release second-quarter results on Aug 6, before market open.

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