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Will Zoetis (ZTS) Disappoint Estimates This Earnings Season?

Zoetis Inc . ZTS is scheduled to report fourth-quarter and full-year 2016 results on Feb 16 before the market opens. The company has consistently beaten earnings expectations. In fact, Zoetis' earnings surpassed expectations in each of the last four quarters, with an average positive surprise of 12.9%.

In the last reported quarter, the company beat expectations with a positive earnings surprise of 13%. Let's see how things are shaping up for this announcement.

A look at Zoetis' share price movement in the past one year shows that the stock has outperformed the Zacks classified industry. In fact, the stock has gained 42.2% during this period, in comparison to a drop of 4.3% for the industry

A look at Zoetis' share price movement in the past one year shows that the stock has outperformed the Zacks classified Medical-Drugs industry. In fact, the stock has gained 42.2% during this period, in comparison to a drop of 4.3% for the industry

Factors to Consider

Concurrent with the third-quarter results, Zoetis updated its outlook for 2016 buoyed by a strong performance through the first nine months of the year, continued strength in the company's business model and an upbeat view for the rest of the year.

Zoetis now expects earnings in the range of $1.91 to $1.96 per share (old guidance: $1.86-$1.93). It has updated the low end of the revenue guidance for 2016 and now expects revenues of $4.85 billion to $4.9 billion (old guidance: $4.8-$4.9 billion).

The company expects companion animal business to be the main contributor to growth in the fourth-quarter 2016. Zoetis' companion animal business has been performing well in both the U.S. and international markets, and should continue to do so in the to-be-reported quarter. The business should be driven by higher sales of Apoquel, several new product launches, including Simparica, and market expansion of key product lines. The company is also working on expanding its market share for Apoquel further.

However, the swine business is under pressure in the U.S. due to increased competition. Performance of Zoetis' livestock business has been disappointing. Poultry business is also declining globally due to market conditions and competitive pressure.

On the fourth-quarter call, investor focus will be on the company's performance, guidance update for 2017 and its business development plans.

Earnings Whispers

Our proven model does not conclusively show that Zoetis will beat 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 be able to beat estimates. Unfortunately, that is not the case here, as you will see below.

Zacks ESP : The Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00%. This is because the the Most Accurate estimate and theZ acks Consensus Estimate currently stands at 45 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Zoetis carries a Zacks Rank #4 (Sell) which when combined with a 0.00% ESP makes surprise prediction difficult.

As it is, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Zoetis Inc. Price and EPS Surprise

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

Other Stocks That Warrant a Look

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

Pacira Pharmaceuticals PCRX has an Earnings ESP of +20.0% and a Zacks Rank #2 . The company is scheduled to release results on Feb 23. You can see the complete list of today's Zacks #1 Rank stocks here .

Incyte Corporation INCY has an Earnings ESP of +85.7% and a Zacks Rank #3. The company is scheduled to release results on Feb 14.

BioMarin Pharmaceuticals, Inc. BMRN has an Earnings ESP of +7.5% and a Zacks Rank #3. The company is scheduled to release results on Feb 23.

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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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