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Can Zoetis (ZTS) Keep the Earnings Streak Alive in Q4?

Zoetis Inc.ZTS is scheduled to report fourth-quarter 2015 results before the opening bell on Feb 16. Last quarter, the company had posted a positive earnings surprise of 25%. In fact, the company has recorded positive earnings surprises in all of the four trailing quarters with an average beat of 15.02%. Let's see how things are shaping up for this announcement.

Factors at Play

Zoetis' robust and diversified product portfolio should help support revenues. The company's companion animal and livestock segment should continue to do well. The addition of Abbott Laboratories' ABT Animal Health business, Apoquel, and other new products should also drive the top line. The company acquired Abbott's animal health assets in Feb 2015 in a bid to strengthen its pain and sedation product portfolio, as well as the diagnostic business. Zoetis has also undertaken comprehensive operational efficiency initiatives that are expected to generate cost savings of approximately $300 million by 2017.

However, foreign currency movements can prove to be a threat this quarter. As of now, Zoetis' 2016 earnings are expected to be $1.84-$1.94 per share on revenues of $4.75 billion to $4.875 billion. We may see an update on the company's 2016 guidance along with its fourth-quarter results.

What Our Model Indicates

Our proven model does not conclusively show that Zoetis is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 39 cents.

Zacks Rank: Zoetis currently carries a Zacks Rank #3. Although the company's Zacks Rank #3 enhances the predictive power of the ESP, its 0.00% ESP makes a surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Cytokinetics, Incorporated CYTK has an Earnings ESP of +6.45% and a Zacks Rank #3. The company is scheduled to release results on Feb 16.

Perrigo Company plc PRGO has an Earnings ESP of +5.26% and a Zacks Rank #3. The company is expected to release results on Feb 18.

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ABBOTT LABS (ABT): Free Stock Analysis Report

PERRIGO CO PLC (PRGO): Free Stock Analysis Report

CYTOKINETCS INC (CYTK): Free Stock Analysis Report

ZOETIS INC (ZTS): Free Stock Analysis Report

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


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

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