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Zoetis (ZTS) Down 7.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Zoetis (ZTS - Free Report) . Shares have lost about 7.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Zoetis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Zoetis' Q4 Earnings and Revenues Surpass Estimates

Zoetis posted fourth-quarter 2020 adjusted earnings of 91 cents per share (excluding one-time items), which was down from the year-ago quarter’s earnings of 92 cents but beat the Zacks Consensus Estimate of 86 cents.

Total revenues grew 8% year over year to$1.8 billion, which beat the Zacks Consensus Estimate of $1.73 billion.

Quarterly Highlights

Zoetis reports business results under two geographical operating segments — the United States and International. It has a diverse portfolio of products for livestock and companion animals.

Revenues from the United States segment increased 11% year over year to $952 million in the fourth quarter. Sales of companion animal products in this region grew 30%, primarily owing to higher sales of the SimparicaTrio, the recently launched triple combination parasiticide for dogs. Apoquel and Cytopoint brands in the dermatology portfolio also led to this increase. However, sales of livestock products decreased 15% in the quarter. Sales of cattle products declined year over year as a result of an earlier fall cattle run, supply constraints on vaccines and generic competition. Sales of both swine and poultry products also declined in the quarter due to unfavorable market conditions related to the COVID-19 pandemic.

Revenues inthe International segment increased 5% year over year on a reported basis (up 7% operationally) to $832 million. Livestock sales decreased 2% on a reported basis and increased 2% operationally.Notably, sales of swine products surged as a result of expanding herd production and beefed-up biosecurity measures in the wake of the African Swine Fever. Sales of companion animal products grew 17% on a reported and operational basis. The Simparica franchise, including Simparica Trio, which was recently launched in the EU, Canada and Australia, and the company’s key dermatology portfolio consisting of both Apoquel and Cytopoint brands led to the growth. Growth in the company’s fish portfolio was driven primarily by increased market share for salmon vaccines and the acquisition of Fish Vet Group.

Full-Year 2020 Results

Zoetis posted 2020 adjusted earnings of $3.85 per share (excluding one-time items), which increased from the year-ago earnings of $3.64 and beat the Zacks Consensus Estimate of $3.80.

Total revenues grew 7% year over year to$6.7 billion, which beat the Zacks Consensus Estimate of $6.60 billion.

2021 Guidance

Zoetis issued guidance for 2021.

The company expects adjusted earnings of$4.36-$4.46 per share.

Revenues are projected between $7.400 billion and $7.550 billion.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.82% due to these changes.

VGM Scores

At this time, Zoetis has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Zoetis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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