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Zoetis' (ZTS) Q2 Earnings Miss Estimates, Revenues Up

·5-min read

Zoetis Inc. ZTS reported second-quarter 2022 adjusted earnings of $1.20 per share (excluding one-time items), which missed the Zacks Consensus Estimate of $1.22 per share. In the year-ago quarter, the company had reported earnings of $1.19 per share.

Total revenues grew 5% year over year to $2.1 billion, which beat the Zacks Consensus Estimate of $2.03 billion.

Shares of Zoetis were up in the pre-market trading session on Thursday. The stock has plunged 25.8% so far this year compared with the industry’s 19.4% decline.

Zacks Investment Research
Zacks Investment Research


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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 — United States and International.

Revenues from the U.S. segment increased 9% year over year to $1.09 billion in the second quarter. Sales of companion animal products in this region grew 13% from the prior-year quarter, primarily owing to higher sales of Simparica Trio, the triple-combination parasiticide for dogs. The Apoquel and Cytopoint brands in the dermatology portfolio also led to this increase. However, sales of livestock products declined 7% year over year for the quarter due to a decrease in cattle product sales due to generic competition for Draxxin and unfavorable conditions in beef and dairy consumer markets.

In the reported quarter, sales of swine products in the U.S segment grew slightly year over year owing to favorable market conditions for producers and higher disease prevalence. Yet, sales of poultry products declined in the quarter due to the expanded use of lower-cost alternatives as well as generic competition for Zoamix.

Revenues in the International segment increased 2% year over year on a reported and 8% on an operational basis to $943 million. Growth across the company’s species portfolio (companion animal and livestock) was hurt by lower sales as a result of the Russia-Ukraine war. Sales of companion animal products grew 8%, primarily owing to the recent launch of Librela and Solensia, the company’s monoclonal antibody (mAb) therapies for dogs and cats, and due to the increased sales of its Apoquel and Cytopoint brands in the dermatology portfolio.

In the international segment, livestock product sales declined 3% year over year on a reported basis and grew 2% operationally. While sales of poultry products decreased owing to reduced flock size in the Latin American markets, the decline was also caused by the unfavorable impact of producer rotational programs with certain medicated feeds in Europe.

Sales of cattle products in the international market increased owing to favorable market conditions and increased prices in both the emerging and the key markets, which included Australia, Turkey, China and the U.K. However, sales of swine products declined due to the declining pork prices and the COVID-related lockdowns in China, which disrupted the company’s supply chain.

2022 Guidance

Owing to the negative impact of foreign exchange rates, Zoetis has updated its full-year 2022 guidance.

The company now expects adjusted earnings in the range of $4.97-$5.05 per share compared with the previous expectation of $4.99-$5.09 per share.

Revenues are now projected between $8.225 to $8.325 billion compared with the previous range of $8.225 to $8.375 billion.

Our Take

Zoetis missed earnings estimates in the second quarter but beat exceeded sales estimates, driven by the strong uptake of companion animal portfolio products. The company, however, slightly lowered its financial guidance for 2022.

Zoetis Inc. Price, Consensus and EPS Surprise

 

Zoetis Inc. Price, Consensus and EPS Surprise
Zoetis Inc. Price, Consensus and EPS Surprise

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

 

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the same sector are Ionis Pharmaceuticals IONS, Neurocrine Biosciences NBIX and Verrica Pharmaceuticals VRCA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ionis’ loss estimates for 2022 have widened from $2.40 to $2.44 in the past 30 days. Shares of Ionis have returned 48.7% year to date. Earnings of IONS beat estimates in two of the last four quarters and missed the mark on the other two occasions. VRCA delivered an earnings surprise of 24.35%, on average.

Neurocrine’s earnings estimates for 2022 have improved from $1.91 to $1.93 in the past 30 days. Shares of NBIX have returned 12% year to date. Earnings of NBIX missed earnings estimates in all the last four quarters. NBIX delivered a negative earnings surprise of 60.73%, on average.

Verrica’s loss estimates for 2022 have narrowed down from $1.26 to $1.13 in the past 30 days. Shares of Verrica have declined 65.1% year to date. Earnings of VRCA beat earnings estimates in all the last four quarters. VRCA delivered an earnings surprise of 28.45%, on average.


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