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Zoetis (ZTS) Beats on Q1 Earnings & Sales, Retains '18 View

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Zoetis Inc. (ZTS - Free Report) posted first-quarter 2018 adjusted earnings of 75 cents per share (excluding one-time items), which increased 42% year over year and beat the Zacks Consensus Estimate of 70 cents.

Total revenues rose 11% year over year (up 7% operationally excluding the impact of currency) to $1.37 billion in the quarter and beat the Zacks Consensus Estimate of $1.33 billion.

A look at Zoetis’ share price movement shows that the stock has outperformed the industry on a year-to-date basis. The stock has gained 15.8% against the industry’s decline of 2.7%.

Quarterly Highlights

Zoetis 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 5% year over year to $634 million. Sales of companion animal products in this region were up 6%, primarily due to higher sales of dermatology portfolio and new product launches. This was partially offset by lower sales of in-line products. Livestock revenues increased 4% mainly due to increased sales of cattle and poultry products, partially offset by declines in dairy products.

Revenues at the International segment grew 18% year over year (up 11% operationally) on a reported basis to $726 million. Livestock sales were up 14% on a reported basis (up 7% operationally) in the quarter mainly driven by strong growth for cattle and poultry products. Moreover, sales of companion animal products grew 28% on a reported basis and 19% on an operational basis, reflecting higher sales of dermatology portfolio and newly launched products, especially Simparica.

2018 Outlook Maintained

Zoetis reiterated its outlook for 2018. The company continues to expect adjusted earnings in the range of $2.96-$3.10 per share.

Revenues are expected in the range of $5.675-$5.800 billion. The Zacks Consensus Estimate for earnings and revenues is pegged at $3.04 per share and $5.75 billion, respectively.

Other Updates

The company continued to expand the availability of its oral flea and tick medication, Simparica, into new markets, with additional approvals in Thailand and Serbia. Zoetis’ canine dermatology product, Cytopoint, received approval in Mexico and Switzerland.

In the United States, the company enhanced its swine vaccine franchise with the approval of Fostera Gold PCV MH for protection against PCV and mycoplasma hyopneumoniae.

Moreover, Inforce 3, a respiratory disease vaccine, received approval in Korea and Egypt while treatment for mastitis in dairy cows, Spectramast DC, was approved in China.

Our Take

Zoetis’ first-quarter results exceeded both earnings and sales expectations. Zoetis became the first animal health company to deliver more than $5 billion in revenues in 2017. The company continued to achieve operational revenue growth driven by diversity of its product portfolio and balanced performance across the United States and all of its major international markets.

For 2018, the company expects to improve its working capital and fund investments that will support its ability to create long-term value for its shareholders.

Zoetis Inc. Price, Consensus and EPS Surprise

 

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

Zacks Rank & Stocks to Consider

Zoetis currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space are Ligand Pharmaceuticals (LGND - Free Report) , Protagonist Therapeutics (PTGX - Free Report) and Catabasis Pharmaceuticals . Whlle Ligand and Protagonist Therapeutics sport a Zacks Rank #1 (Strong Buy), Catabasis carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates moved up from $4.24 to $4.43 for 2018 and remained stable at $5.32 for 2019 over the last 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 24.88%. The company’s shares have rallied 14.6% year to date.

Protagonist Therapeutics’ loss estimates narrowed from $1.68 to 66 cents for 2018 and from $2.43 to $1.26 for 2019 over the last 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 24.95%.

Catabasis’ loss estimates narrowed from 92 cents to 90 cents for 2018 and from $1.48 to $1.43 for 2019 in the last 30 days. The company came up with positive earnings surprise in all the preceding four quarters, with an average beat of 14.56%. The stock has rallied 7.4% year to date.

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