Is a Beat in Store for Zoetis (ZTS) This Earnings Season?

We expect Zoetis Inc (NYSE:ZTS). ZTS to surpass expectations when it reports first-quarter 2021 results on May 6 before market opens.

The company’s earnings surprise history has been excellent so far, having surpassed expectation in each of the trailing four quarters, the average beat being 18.05%. In the last-reported quarter, Zoetis delivered an earnings surprise of 5.81%.

Shares of Zoetis have increased 4.5% in the year so far against the industry’s decrease of 8.4%.

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

Factors to Consider

Zoetis derives a majority of its revenues from a diversified product portfolio of medicines and vaccines used to treat and protect livestock and companion animals. The company reports business results under two geographical operating segments — the United States and International.

Solid sales from the dermatology portfolio strengthened the United States segment in the last-reported quarter, a trend that most likely continued in the first quarter as well. The company’s companion animal business has also been performing well, primarily owing to higher sales of the SimparicaTrio – the recently launched triple combination parasiticide for dogs.

In the last-reported quarter, sales of cattle products declined year over year – a trend that most likely continued in the first quarter as well. Sales of both swine and poultry products also declined in the last-reported quarter due to unfavorable market conditions related to the COVID-19 pandemic, a trend that most likely continued in the first quarter as well.

For the International segment, sales of companion animal products increased in the last-reported quarter. Sales also benefited as clinics expanded their operations following less COVID-19-related restrictions. The trend is expected to have continued in the first quarter as well. Growth in the company’s fish portfolio also went up due to increased market share for salmon vaccines and the acquisition of Fish Vet Group, a trend that most likely continued in the first quarter as well.

In February 2021, the European Commission granted marketing authorization to Solensia (frunevetmab) – a new feline osteoarthritis ("OA") treatment to alleviate pain. Solensia is the first injectable mAb licensed for the alleviation of pain associated with OA in cats. We expect more updates on the same at the upcoming earnings call.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Zoetis this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Zoetis has an Earnings ESP of +2.77% as the Zacks Consensus Estimate stands at $1.04 per share while the Most Accurate Estimate is pegged at $1.07 per share.

Zacks Rank: Zoetis has a Zacks Rank #3.

Other Stocks to Consider

Here are some other drug/biotech stocks that have the right combination of elements to beat on earnings this time around:

Axsome Therapeutics (NASDAQ:AXSM), Inc. AXSM with an Earnings ESP of +23.83% and a Zacks Rank #3. The company is scheduled to report earnings on May 10.

Aerie Pharmaceuticals, Inc.AERI with an Earnings ESP of +6.25% and a Zacks Rank #2. The company is scheduled to report earnings on May 5.

Milestone Pharmaceuticals (NASDAQ:MIST) Inc. MIST has an Earnings ESP of +19.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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