A month has gone by since the last earnings report for Zoetis (ZTS Quick QuoteZTS - Free Report) . Shares have lost about 0.4% 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 drivers.

Zoetis Beats on Q3 Earnings & Sales, Updates '18 View

Zoetis posted third-quarter 2018 adjusted earnings of 83 cents per share (excluding one-time items), which increased 27.7% year over year from 65 cents and beat the Zacks Consensus Estimate of 77 cents.

Total revenues rose 9.9% year over year (up 12% operationally, excluding the impact of currency) to $1.48 billion and beat the Zacks Consensus Estimate of $1.46 billion.

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 11% year over year to $757 million. Sales of companion animal products in this region were up 20%, primarily due to higher sales of dermatology portfolio and Simparica, and the acquisition of Abaxis. This was partially offset by lower sales of some in-line products due to anticipated competition. Livestock revenues increased 1%, mainly as growth in poultry and swine was offset by cattle.

Revenues at the International segment grew 8% year over year (up 12% operationally) on a reported basis to $709 million. Livestock sales were up 5% (up 10% operationally) in the quarter. Growth of cattle products was driven by Brazil due to recovery from the effects of the national trucking industry strike in the previous quarter, increased local consumption of beef and increased exports.

Moreover, sales of companion animal products grew 16% on a reported basis, reflecting higher sales of dermatology portfolio and two new parasiticide products — Simparica (sarolaner) for dogs and Stronghold Plus (selamectin/sarolaner) for cats — and the acquisition of Abaxis.

2018 Outlook

Zoetis updated its outlook for 2018. The company expects adjusted earnings of$3.08-$3.13 per share, revised from its previous expectation of $3.00-$3.10 per share

Revenues are now expected to be $5.75-$5.80 billion, updated from the previous guidance of $5.70-$5.80 billion

The Zacks Consensus Estimate for earnings and revenues is pegged at $3.06 per share and $5.78 billion, respectively.

The updated guidance reflects foreign exchange rates as of mid-October and includes the partial year impact of Abaxis.

Other Updates

Zoetis received approval in the United States for an additional indication for Cytopoint. This novel monoclonal antibody (mAb) therapy for dogs is now approved to treat allergic dermatitis in addition to atopic dermatitis. Cytopoint is also approved in the European Union and several other international markets.
 

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Zoetis has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Zoetis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.