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Zoetis (ZTS) Gears Up for Q2 Earnings: What's in Store?

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Zoetis Inc. (ZTS - Free Report) is scheduled to report second-quarter 2018 results on Aug 2, before the opening bell.

Zoetis’ performance has been impressive, with the company surpassing expectations in three of the previous four quarters and meeting in one. The average positive earnings surprise for the last four quarters is 3.72%.

Zoetis’ share price movement shows that the stock has outperformed the industry on a year-to-date basis. The stock has moved up 17.3% against the industry’s decline of 2.0% during this period.

Let's see how things are shaping up for this announcement.

Factors to Consider

Zoetis derives 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.

The company expects to generate more than $500 million in combined sales from Apoquel and Cytopoint in 2018. Oral parasite Simparica gained market share in the United States in 2017 and the company expects further growth in 2018. The company also expects to see more favorable conditions for livestock in 2018, particularly in the United States. Livestock growth is expected to reflect improved conditions in the United States.

The company expects to see stronger growth from its companion animal portfolio in 2018, driven by its dermatology portfolio, Apoquel and Cytopoint, further penetration of Simparica, and ongoing uptake of new vaccines.

During the second quarter, the company announced that it will acquire Caifornia-based Abaxis to augment its presence in the animal health diagnostics market, a fast-growing portion of the animal health industry, which should further boost sales.

Moreover, Zoetis’ five-year collaboration agreement with Regeneron (REGN - Free Report) to research on the use of the latter’s monoclonal antibody therapeutics in animals and discover new veterinary treatments will further diversify the broad portfolio. 

We expect the company to throw more light on its Abaxis acquisition plans and other pipeline updates.

What Our Model Indicates

Our proven model does not conclusively show an earnings beat for Zoetis in the to-be reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. But that is not the case here, as you will see below.

Earnings ESP: Zoetis has an Earnings ESP of -0.10% as the Zacks Consensus Estimate is pegged at 71 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Zoetis currently has a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive Earnings ESP to be confident of an earnings beat.

We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Zoetis Inc. Price and EPS Surprise

 

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

Stocks That Warrant a Look

Here are some drug/biotech stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Pacira Pharmaceuticals, Inc. (PCRX - Free Report) has an Earnings ESP of +42.86% and currently carries a Zacks Rank #2. The company is scheduled to release second-quarter report on Aug 2.

Endo International Plc. (ENDP - Free Report) has an Earnings ESP of +0.72% and currently carries a Zacks Rank #3. The company is scheduled to release second-quarter results on Aug 8.

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