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Zoetis Inc. (ZTS - Analyst Report) is set to report first quarter 2014 results on May 6 before the opening bell. Last quarter it posted a positive surprise of 2.86%. Let’s see how things are shaping up for this announcement.

Growth Factors this Quarter

Zoetis’ earnings in the last reported quarter were ahead of the Zacks Consensus Estimate by a penny. Moreover, Zoetis managed to post positive earnings surprises in two of the last four quarters, with an average beat of 1.96%.

Although a robust and diversified product portfolio should help Zoetis to boost its top line this quarter as well, a number of negative factors are likely to mar the overall results for the first quarter of 2014. Zoetis has already taken a number of initiatives to expand its business. These expansion initiatives are likely to impact the company’s selling, general & administrative expenses, which will in turn weigh upon its bottom line. Also, Zoetis’ revenues were hurt by 2% in the fourth quarter of 2013 by adverse foreign currency movements. Negative foreign currency fluctuations can prove to be a threat in this quarter as well.

We note that Zoetis is the former Animal Health business of Pfizer Inc. (PFE - Analyst Report). Zoetis started trading on the New York Stock Exchange from Feb 1, 2013.

Earnings Whispers?

Our proven model does not conclusively show that Zoetis is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Zoetis is -2.70% since the Most Accurate Estimate stands at 36 cents, below the Zacks Consensus Estimate of 37 cents.

Zacks Rank: Zoetis’ Zacks Rank #3 when combined with a -2.70% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements − a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3

Allergan Inc. (AGN - Analyst Report) has an Earnings ESP of +0.89% and holds a Zacks Rank #2 (Buy). Allergan will be reporting first quarter earnings on May 7 before the opening bell.

Perrigo Company Public Limited Company (PRGO - Analyst Report) has an earnings ESP of +0.65% and holds a Zacks Rank #3. Perrigo will be reporting first quarter earnings on May 7 before the opening bell.

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