It has been about a month since the last earnings report for Zoetis (ZTS - Free Report) . Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zoetis due for a pullback? 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 Beats on Q4 Earnings & Sales
Zoetis posted fourth-quarter 2018 adjusted earnings of 79 cents per share (excluding one-time items), which increased 14.5% year over year from 69 cents and beat the Zacks Consensus Estimate of 77 cents.
Total revenues rose 7.1% year over year to $1.56 billion and marginally beat the Zacks Consensus Estimate of $1.52 billion.
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 14% year over year to $809 million. Sales of companion animal products in this region were up 26%, 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 3%..
Revenues at the International segment decreased 2% year over year on a reported basis (up 5% operationally) to $727 million. Livestock sales declined 6% (up 2% operationally) in the quarter. Sales of cattle products were relatively flat in the quarter. Increased revenues in poultry products were the result of solid performance in other emerging markets, including Egypt and Indonesia.
Moreover, sales of companion animal products grew 7% 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. The acquisition of Abaxis also fueled growth.
Full-Year 2018 Results
For 2018, adjusted earnings came in at $3.13 per share, up from the year-ago earnings of $2.4.
Revenues increased 10% year over year to $5.83 million in 2018.
The company expects adjusted earnings of$3.42-$3.52per share. Revenues are expected to be $6.175-$6.300 billion. The guidance reflects foreign exchange rates as of late January.
Zoetis received approval in the United States and Canadafor Revolution Plus (selamectin and sarolaner topical solution), a new combination topical product for cats and kittens that provides parasite protection against fleas, ticks, ear mites, roundworms, hookworms and heartworms.
The company also continued to bring its newest leading canine products to additional markets. Cytopoint (lokivetmab), a monoclonal antibody that is part of Zoetis’ canine dermatology portfolio, and Simparica, an oral flea and tick medication for dogs, received additional approvals in countries in Asia and the Middle East.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Zoetis has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Zoetis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.