Zoetis (ZTS) Beats Earnings, Revenue Estimates In Q1

Zoetis Inc. (NYSE:ZTS) first-quarter 2017 earnings of 53 cents per share increased 10% year over year and surpassed the Zacks Consensus Estimate of 48 cents.

Total revenue growth was up 6% operationally (excluding the impact of currecy) to $1.23 billion year over year in the quarter and beat the Zacks Consensus Estimate of $1.19 billion.

In fact, a look at Zoetis’ share price movement year to date shows that the stock has underperformed the Zacks classified Medical-Drugs industry. The stock was up 3.8% compared with the industry’s gain of 4.2%.

Quarterly Highlights

Zoetis manages its business across two regional operating segments – the U.S. and International. Within these segments, the company offers a diverse portfolio of products for livestock and companion animals.

Revenues in the U.S. segment were up 4% to $631 million. Within this segment, sales of companion animal products were up 10%, reflecting higher sales of Apoquel and other product launches (Simparica Chewables and Cytopoint). However, Livestock revenues slipped 3% mainly due to decreased sales of swine and cattle products.

Revenues at the International segment grew 8% (up 9% operationally) on a reported basis to $615 million on a reported basis. Sales of livestock products were up 7% on a reported and operational basis in the quarter due to increased sales of swine products in China and Vietnam, and cattle products in Brazil. Nonetheless, livestock sales were adversely impacted by product rationalizations.

Sales of companion animal products grew 13% on a reported basis (up 15% operationally), driven by higher sales of Apoquel, new product launches, particularly Simparica and increased demand in China for the companion animal vaccines portfolio.

2017 Outlook

Zoetis reiterated its outlook for 2017. The company expects earnings in the range of $2.26 to $2.36 per share on revenues in $5.10 billion and $5.225 billion band. The Zacks Consensus Estimate for earnings is $2.67 per share on revenues of $5.49 billion.

Other Updates

The company received approval for Cytopoint in the European Union in Apr 2017 and in Canada in Mar 2017. The approval will help the company to strengthen its canine dermatology portfolio. In fact, Cytopoint is the first monoclonal antibody (mAb) therapy approved to help provide a reduction in the clinical signs associated with atopic dermatitis such as itching in dogs.

Also, Zoetis received European Commission approval for Stronghold Plus in Feb 2017. It is a topical combination product that treats ticks, fleas, ear mites, lice and gastrointestinal worms and prevents heartworm disease in cats.

During the quarter the company inked a deal to purchase Nexvet Biopharma plc, as well. The latter is an innovator in monoclonal antibody therapies for companion animals used in managing chronic pain as well as in other therapeutic areas.

Our Take

Zoetis’ first-quarter results were better than expected, with the company surpassing bottom-line estimates along with revenues. Performance of the companion animal business was encouraging due to higher global sales of Apoquel and other new products. The company maintained its outlook for 2017.

Notably, successful launches of new products and the diversity of the company’s portfolio boosted performance in the quarter. However, unfavorable currency movement continued to hurt the top line.

Zacks Rank & Stocks to Consider

Zoetis is a Zacks Rank #3 (Hold) stock. Top-ranked stocks in the health care sector include Aeglea BioTherapeutics (NASDAQ:AGLE) , Galena Biopharma, Inc. (NASDAQ:GALE) and Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aeglea BioTherapeutics’ loss per share estimates narrowed from $3.64 to $2.48 for 2017 over the last 60 days. Its share price increased 52.8% year to date.

Galena’s loss per share estimates narrowed from $2.03 to 58 cents for 2017 over the last 60 days. The company posted positive earnings surprises in two of the four trailing quarters, with an average beat of 53.83%.

Infinity Pharma’s loss per share estimates narrowed from $1.43 to $1.03 for 2017 and from $1.75 to $1.52 over the last 60 days. The company posted positive earnings surprises in three of the four trailing quarters, with an average beat of 36.64%.

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