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Zoetis (ZTS) Beats on Q3 Earnings & Sales, Ups 2017 View

Zoetis Inc. ZTS third-quarter 2017 earnings of 65 cents per share increased 25% year over year on a reported as well as operational (excluding foreign impact) basis and beat the Zacks Consensus Estimate of 63 cents. The year-over-year increase in earnings was primarily due to the company’s focus on controlling cost of goods and expenses.

Total revenues rose 8.5% year over year (up 8% operationally excluding the impact of currency) to $1.35 billion in the quarter and beat the Zacks Consensus Estimate of $1.32 billion.

A look at Zoetis’ share price movement shows that the stock has outperformed the industry on a year-to-date basis. The stock is up 20.6% against the industry’s decline of 0.8%.

Quarterly Highlights

Zoetis reports its business under two geographical operating segments – the United States and International. The company has a diverse portfolio of products for livestock and companion animals.

Revenues in the United States segment were up 6% year over year to $680 million. Sales of companion animal products in this geography were up 21%, primarily due to higher sales of dermatology portfolio and product launches, especially Simparica. However, livestock revenues declined 6% mainly due to decreased sales of cattle products, partially offset by higher sales of poultry medicated feed additive products.

Revenues at the International segment grew 12% year over year (up 11% operationally) on a reported basis to $654 million. Livestock sales were up 10% on a reported basis (up 9% operationally) in the quarter mainly due to increased sales of fish products in Norway and cattle products in Brazil, Argentina and Australia. Moreover, sales of companion animal products grew 15% on a reported as well as operational basis, reflecting higher sales of Simparica and Apoquel.

2017 Outlook Raised

Zoetis increased its sales and earnings outlook for 2017. The company expects earnings in the range of $2.34 to $2.39, up from the prior guidance of $2.30 to $2.37 per share.

Revenues are expected in the range of $5.225 billion to $5.275 billion, up from $5.15 billion to $5.25 billion expected previously. The Zacks Consensus Estimate for earnings and revenues is pegged at $2.34 per share and $5.21 billion, respectively.

Other Updates

The company received approval for Suvaxyn in the EU in August 2017, which boosted its swine vaccine portfolio. In July, the company expanded the reach of its poultry diagnostics products into major European markets.

Zoetis also received approval in Japan and Taiwan for Simparica, an oral flea and tick medication for dogs.

The company completed the acquisition of Nexvet Biopharma plc during the quarter. Nexvet is an innovator of monoclonal antibody therapies for companion animals used to manage chronic pain and address other therapeutic areas.

Our Take

Zoetis’ third-quarter results were better than expected. The companion animal business performed impressively on higher international sales of Apoquel and Simparica and increased U.S. dermatology sales. The company is focused on controlling its operating costs and expense, which improved its margins in the third quarter.

Zoetis Inc. Price, Consensus and EPS Surprise

 

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

Zacks Rank & Key Picks

Zoetis carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the pharma sector include Agenus Inc. AGEN, Myriad Genetics, Inc. MYGN and Exelixis, Inc. EXEL. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agenus’ loss estimates remained stable at $1.17 for 2017 and narrowed from $1.40 to $1.36 for 2018 over the last 30 days. The company delivered a positive earnings surprise in three of the four trailing quarters with an average beat of 4.27%. .

Myriad’s earnings per share estimates increased from $1.02 to $1.04 for 2018 and from $1.15 to $1.19 for 2018 over the last 30 days. The company delivered a positive earnings surprise in three of the four trailing quarters with an average beat of 6.17%. The company’s shares are up 103% so far this year.

Exelixis’ earnings per share estimates remained stable at 26 cents for 2017 and increased from 63 cents to 64 cents for 2018 over the last 30 days. The company delivered positive earnings surprises in all the four trailing quarters with an average beat of 543.59%. The company’s shares are up 62.5% so far this year.

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