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Zoetis (ZTS) Earnings Beat Estimates in Q1, Revenues Miss

Zoetis Inc. ZTS 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.

Zoetis’ stock has gained 18.9% compared with the industry’s growth of 9.4% year to date.

Quarterly Highlights

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.

2019 Outlook

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 Zacks Consensus Estimate for earnings and revenues is pegged at $3.46 and $6.27 billion, respectively.

The guidance reflects foreign exchange rates as of late April.

Other Updates

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.

Our Take

Zoetis’ first-quarter results exceeded earnings estimates on the back of growth in new parasiticide products (Simparica and Stronghold Plus), vaccines, strong dermatology portfolio and the addition of the Abaxis’ diagnostics portfolio.

However, the company’s revenues missed expectations marginally.

Zoetis Inc. Price, Consensus and EPS Surprise

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


Zacks Rank and Other Stocks to Consider

Zoetis currently has a Zacks Rank #2 (Buy).

Some other top-ranked stocks worth considering are Eisai Co. ESALY, BioSpecifics Technologies Corp. BSTC, FibroGen Inc. FGEN. All of them sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Eisai’s earnings per share estimates have increased from $1.91 to $1.95 for 2019 and from $1.93 to $2.02 for 2020 in the past 60 days.

BioSpecifics’ earnings per share estimates have increased from $2.78 to $3.01 for 2019 in the past 60 days. The company delivered a positive earnings surprise in two of the trailing four quarters by an average of 12.46%.

FibroGen delivered a positive earnings surprise in three of the trailing four quarters, the average being 265.21%.

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