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Zoetis (ZTS) to Report Q3 Earnings: What's in the Cards?

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Zacks Equity Research
·4 min read
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Zoetis Inc. ZTS  is scheduled to report third-quarter 2020 results on Nov 5, before market open.

The company flaunts an excellent earnings surprise history, surpassing expectations in the trailing four quarters by 13.24%, on average. In the last reported quarter, the company delivered an earnings surprise of 34.85%.

Shares of Zoetis have increased 19.8% in the year so far against the industry’s decline of 11.4%.

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

What Our Model Indicates

Our proven model predicts an earnings beat for Zoetis this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here as you will see below.

Earnings ESP: Zoetis has an Earnings ESP of +3.98%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2.

Factors to Consider

Zoetis derives a majority of revenues from a diversified product portfolio of medicines and vaccines used to treat and protect livestock and companion animals. The company reports results under two geographical operating segments, namely the United States and International. Solid sales from the dermatology portfolio strengthened the United States segment in the last reported quarter, a trend that most likely continued in the third quarter too. The company’s companion animal business has been performing well too. Simparica franchise, including some initial stocking of Simparica Trio, the new triple combination parasiticide, continues to drive growth for the companion animal portfolio.

However, sales of livestock products declined in the last reported quarter due to disruptions in the food supply chain including reduced producer processing due to capacity and continued channel migration from dining out to preparing food at home impacted producer profitability. This resulted in a decline across each of the cattle, swine and poultry portfolios. The trend might have persisted in the third quarter and negatively impacted sales.

For the International segment, sales of companion animal products declined in the second quarter due to the impact of COVID-19 and social distancing measures. The trend is expected to have continued in the third quarter. Sales of livestock should also witness a declining trend. However, the dermatology portfolio is expected to have gained in the third quarter.

During the second quarter, the company stated that it expects overall revenue growth for the remainder of 2020 to be driven largely by companion animal products, especially parasiticides, and its key dermatology portfolio. Hence, the company raised its guidance to reflect its current outlook for the year. The company expects adjusted earnings of $3.52-$3.68 per share for 2020 compared with the previous guidance of $3.17-$3.42.

The company raised its revenue guidance for 2020 to $6.300-$6.475 billion from the previous range of $5.950-$6.250 billion.

Other Stocks to Consider

Here are some other biotech stocks that have the right mix of elements to beat on earnings this time around:

Bristol-Myers’ Squibb BMY has an Earnings ESP of +0.44% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axcella Health Inc. AXLA has an Earnings ESP of +10.90% and a Zacks Rank of 3.

Aeglea Bio Therapeutics AGLE has an Earnings ESP of +13.16% and is Zacks #3 Ranked.

Zoetis Inc. Price and Consensus


Zoetis Inc. Price and Consensus
Zoetis Inc. Price and Consensus

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

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