Will Zoetis (ZTS) Miss Estimates in Q4? - Analyst Blog

By Zacks Equity Research,

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Zoetis Inc. ( ZTS ) is set to report fourth quarter and full year 2013 results on Feb 11 before the opening bell. Last quarter it posted a -2.86% surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Quarter

Although a robust and diversified product portfolio should help Zoetis to boost its top line, a number of negative factors are likely to mar the overall results for the fourth quarter. Zoetis has already taken a number of initiatives to expand its business. These expansion initiatives are likely to impact the company's selling, general & administrative expenses, which will in turn weigh upon its bottom line. Also, Zoetis' revenues were hurt by 1% in the third quarter of 2013 by adverse foreign currency movements. Negative foreign currency fluctuations remain a threat in this quarter as well.

Zoetis' earnings in the last reported quarter fell short of the Zacks Consensus Estimate by a penny. Moreover, Zoetis managed to post positive earnings surprise in just one of the last three quarters, with an average beat of 1.51%. We note that Zoetis is the former Animal Health business of Pfizer Inc. ( PFE ). Zoetis started trading on the New York Stock Exchange from Feb 1, 2013.

Earnings Whispers?

Our proven model does not conclusively show that Zoetis is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP : The Earnings ESP for Zoetis is 0.00% since the Most Accurate Estimate stands at 35 cents, in line with the Zacks Consensus Estimate.

Zacks Rank : Zoetis' Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Acorda Therapeutics, Inc. ( ACOR ) has an Earnings ESP of +61.11% and holds a Zacks Rank #3. Acorda will be reporting fourth quarter earnings on Feb 13.

Charles River Laboratories International, Inc. ( CRL ) has an earnings ESP of +1.47% and holds a Zacks Rank #2 (Buy). Actavis will be reporting fourth quarter earnings on Feb 11.

ACORDA THERAPT (ACOR): Free Stock Analysis Report

CHARLES RVR LAB (CRL): Free Stock Analysis Report

PFIZER INC (PFE): Free Stock Analysis Report

ZOETIS INC (ZTS): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ACOR , CRL , PFE , ZTS

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