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Zoetis (ZTS) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Zoetis Inc. ZTS reported first-quarter 2023 adjusted earnings (excluding one-time items) of $1.31 per share, which beat the Zacks Consensus Estimate and our model estimates of $1.27 and $1.29, respectively. In the year-ago quarter, the company reported earnings of $1.32 per share.

Total revenues grew 1% year over year to $2 billion, but slightly missed the Zacks Consensus Estimate of $2.01 billion.

Shares of Zoetis were down in the pre-market trading session on Thursday. The stock has gained 21.3% in the year-to-date period against the industry’s 0.1% decline.

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Quarterly Highlights

Zoetis derives the majority of its revenues from a diversified product portfolio of medicines and vaccines used to treat and protect livestock and companion animals. The company reports business results under two geographical operating segments — the United States and International.

Revenues from the U.S. segment declined 1% year over year to $1.005 billion for the first quarter. Sales of companion animal products in this region fell 7% from the prior-year quarter’s level. This was mainly due to distributor de-stocking across the portfolio and higher purchases in the fourth quarter of 2022, ahead of expected price increases.

Nevertheless, sales of livestock products surged 15% year over year. This can be attributed to an increase in cattle product sales as a result of improved product supply and growth across beef implant portfolio.

Revenues from poultry products increased in the reported quarter. This was driven by an increase in  sales of vaccines despite a challenging economic condition. However, this growth was partially offset by a decline in swine product revenues due to lower disease prevalence.

Revenues in the International segment improved 3% year over year to $978 million. Sales of companion animal products grew 3% on a reported and 10% on an operational basis, driven by growth in several key products. These include monoclonal antibody products for osteoarthritis pain— Librela, dermatology product Cytopoint and feline vaccines.

On a year-over-year basis, livestock product sales grew 3% on a reported basis and 10% operationally. Growth in the cattle portfolio was driven by improved sales in Australia and smaller emerging markets. Sales of poultry products also increased due to market expansion in several key geographies.

Zoetis received several approvals for new indications and claims the same for its key product franchises. Simparica Trio received approval in the EU for the prevention of eyeworms and effectiveness against sarcoptic and demodectic mange.

2023 Guidance Reiteration

Zoetis reiterates its previously issued guidance for 2023.

Revenues are projected in the range of $8.575-$8.725 billion (Operational growth of 6-8%).

The company expects adjusted earnings in the band of $5.34-$5.44 per share.

Our Take

Zoetis’ earnings exceeded estimates in the reported quarter, while sales missed the same. The bottom-line performance can be attributed to the strong uptake of livestock products. ZTS expects to continue witnessing growth. This is due to the persistent strength of the pet care portfolio, key dermatology products, ongoing expansion in international markets and the acceleration of its diagnostics portfolio penetration.

Zoetis Inc. Price and EPS Surprise

Zoetis Inc. Price and EPS Surprise
Zoetis Inc. Price and EPS Surprise

Zoetis Inc. price-eps-surprise | Zoetis Inc. Quote

Zacks Rank & Stocks to Consider

Zoetis currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Ocuphire Pharma OCUP, Allogene Therapeutics ALLO and Arcus Biosciences RCUS. While Ocuphire Pharma sports a Zacks Rank #1 (Strong Buy), Allogene Therapeutics and Arcus Biosciences, both carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Loss per share estimates for Ocuphire Pharma have narrowed from 29 cents to 24 cents for 2023 and from 86 cents to 81 cents for 2024, in the past 60 days. The company’s shares have surged 68% in the year-to-date period. Ocuphire’s earnings beat estimates in three of the last four quarters and missed the mark in one occasion, the average surprise being 23.85%.

Loss per share estimates for Allogene have narrowed from $2.56 to $2.44 for 2023, in the past 60 days. Shares of ALLO have gained 2% in the year-to-date period. Allogene’s earnings beat estimates in each of the last four quarters, the average surprise being 8.33%.

Loss per share estimates for Arcus Biosciences have narrowed from $4.52 to $4.42 for 2023 and from $3.51 to $3.33 for 2024, in the past 60 days. Shares of RCUS have plunged 9.8% in the year-to-date period. Arcus Biosciences’ earnings outpaced estimates in two of the last four quarters, met the mark in one and missed in another, the average negative surprise being 48.83%.

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