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Is Zoetis (ZTS) Poised for a Beat This Earnings Season?

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Zoetis Inc. (ZTS - Free Report) is scheduled to report second-quarter 2017 results on Aug 8 before the market opens.

Zoetis’ has consistently surpassed earnings estimates in each of the last four quarters, with an average positive surprise of 9.8%.In the last quarter, the company beat expectations with a positive earnings surprise of 10.42%. Let's see how things are shaping up for this announcement.

Zoetis’ share price movement year to date shows that the stock has outperformed the industry. The stock has moved up 16.8% compared with industry’s gain of 3.7% during this period.

Why a Likely Positive Surprise?

Our proven model shows that Zoetis is likely to beat estimates this quarter because it has the right combination of two key ingredients.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.89%. This is because the Most Accurate estimate is 54 cents while the Zacks Consensus Estimate is pegged at 53 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Zoetis currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat in the upcoming release.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Zoetis Inc. Price and Consensus


Zoetis Inc. Price and Consensus | Zoetis Inc. Quote

Factors to Consider

Zoetis derives the majority of its revenues from a diversified product portfolio of medicines and vaccines used to treat and protect livestock and companion animals. The company continues to strengthen its diverse products portfolio through lifecycle innovations, strong customer relationships and access to new markets and technologies.

Concurrent with the first earnings call, Zoetis reiterated its 2017 outlook. The company expects earnings in the range of $2.26–$2.36 and revenues of$5.10 billion–$5.225 billion per share. The company’s companion animal business has been performing well of late. Apoquel and other product launches continue to drive growth. The company expects to witness stronger growth from its companion animal portfolio in 2017 driven by its dermatology portfolio, Apoquel and Cytopoint, further penetration of Simparica, and the ongoing uptake of new vaccines.

Zoetis expects to witness growth in the livestock business as it overcomes product rationalization impacts.

In May 2015, Zoetis announced comprehensive operational efficiency initiatives that are expected to generate cost savings of more than $300 million by the end of 2017.

Zoetis recently acquired Nexvet Biopharma, an innovator in monoclonal antibody therapies for companion animals. The acquisition is expected to strengthen Zoetis’ pipeline of solutions for chronic pain management in dogs and cats, which represents an area of high-need in companion animal health.

We expect management to throw more light on its acquisition strategy.

Stocks That Warrant a Look

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

Tesaro, Inc. (TSRO - Free Report) has an Earnings ESP of +16.40% and a Zacks Rank #3.  The company is expected to release results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impax Laboratories has an Earnings ESP of +7.14% and a Zacks Rank #3. The company is expected to release second-quarter results on Aug 9.

BioMarin Pharmaceuticals (BMRN - Free Report) has an Earnings ESP of +4.55% and currently carries a Zacks Rank #3. The company is expected to release second-quarter results on Aug 2.

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