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Zoetis (ZTS) Beats Q4 Earnings Estimates, Lowers Outlook

Zoetis Inc . ZTS fourth-quarter 2016 earnings of 47 cents per share surpassed the Zacks Consensus Estimate of 45 cents. Earnings were also up from 43 cents reported in the year-ago period.

Total revenue growth was relatively flat year over year at $1.28 billion in fourth-quarter 2016, in line with the Zacks Consensus Estimate.

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 32% during this period, in comparison to a drop of 1.8% for the industry.

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.

In the reported quarter, sales of livestock products accounted for 61.8% of the total revenue. Of this, 37.3% came from the sale of companion animal products and the remaining revenues were generated from contract manufacturing.

Revenues in the U.S. segment were down 1% to $631 million due to fewer calendar days and product rationalizations. Within this segment, sales of companion animal products were up 2%, reflecting higher sales of Apoquel and other product launches (Simparica Chewables and Cytopoint), partially offset by a decline in the company's surgical fluid products. However, Livestock revenues slipped 3% mainly due to product rationalizations as part of the company's operational efficiency initiative, which impacted swine.

Revenues at the International segment grew 2% on a reported basis to $636 million. Sales of livestock products were roughly flat on a reported basis in the quarter as the impact of product rationalizations and fewer calendar days were offset by growth from the acquisition of Pharmaq along with growth in cattle and swine products in key emerging markets. Sales of companion animal products grew 8% on a reported basis (up 10% operationally), driven by higher sales of Apoquel and other launches

2016 Results

Revenues came in at $4.9 billion, up from $4.8 billion in 2015, in line with the Zacks Consensus Estimate. Earnings per share came in at $1.96, up from $1.77 in 2015 and beat the Zacks Consensus Estimate of $1.95.

Zoetis Inc. Price and EPS Surprise

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

2017 Outlook Updated

Zoetis narrowed its outlook for 2017 to account for currency impact. In 2017, the company expects earnings in the range of $2.26 to $2.36 per share (old guidance: $2.28 to $2.38 per share) on revenues of $5.10 billion and $5.225 billion (old guidance: $5.15 billion and $5.275 billion). The Zacks Consensus Estimate for earnings is $2.33 per share on revenues of $5.18 billion.

Our Take

Zoetis' fourth-quarter results were better than expected, with the company surpassing bottom-line estimates while revenues came in line with the expectations. Performance of the companion animal business was encouraging due to higher global sales of Apoquel and other new products.

Successful launches of new products and the diversity of the company's portfolio boosted performance in 2016. However, unfavorable currency movement continued to hurt the top line. The company narrowed its outlook for 2017 to account for currency impact.

Zacks Rank & Stocks to Consider

Zoetis is a Zacks Rank #4 (Sell) stock.

Some better-ranked stocks in the healthcare sector are Sunesis Pharmaceuticals SNSS , GlaxoSmithKline GSK and Sucampo Pharmaceuticals SCMP . While Sunesis sports a Zacks Rank #1 (Strong Buy), Sucampo and Glaxo carry a Zacks Rank #2 (Buy).

You can see the complete list of today's Zacks #1 Rank stocks here .

Sunesis' loss estimates narrowed by 5.06% and 8.80% for 2016 and 2017, respectively, over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 0.54%.

Sucampo's earnings estimates were stable at $1.22 for 2016 but have increased from $1.69 to $1.74 for 2017 over the last 60 days. The company posted a positive earnings surprise in all the four trailing quarters with an average beat of 35.5%.

GlaxoSmithKline's earnings estimates increased from $2.71 to $2.72 for 2017 and from $2.80 to $2.85 for 2018 over the last seven days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 11.03%. Its share price increased 5.3% year to date.

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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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