Zoetis’ ZTS second-quarter 2015 adjusted earnings of 43 cents per share were ahead of the Zacks Consensus Estimate of 38 cents. Earnings were also above the year-ago figure by 5 cents.
Revenues at Zoetis increased 1% year over year to $1.2 billion in the second quarter of 2015. Foreign currency movements impacted revenues negatively. Revenues were slightly ahead of the Zacks Consensus Estimate of $1.1 billion.
Quarterly Details
Zoetis boasts a robust and diversified product portfolio. Zoetis markets its offerings primarily across the following species: cattle, swine, poultry, others (livestock) and dogs, cats and horses (companion animals). In the second quarter of 2015, sales of livestock products accounted for 58.7% of total revenues. Approximately 40.1% of revenues in the quarter came from the sale of companion animal products. The balance came from contract manufacturing.
Geographically, the company has consolidated its current four-region structure to a two-region structure comprising U.S. and International.
Sales improved in the U.S. by 17% to $539 million driven by strong sales of livestock products. Sales in the International segment were down 9% to $622 million (increased 6% operationally).
Outlook
Zoetis narrowed its 2015 guidance to reflect its year-to-date performance and outlook for the remainder of 2015. For 2015, excluding one-time items, earnings are expected to be in the range of $1.63 to $1.68 per share (previous guidance: $1.61 to $1.68 per share). The Zacks Consensus Estimate of $1.65 is within the guidance range. The company expects revenues to be between $4.7 billion and $4.775 billion (previous guidance: $4.675 billion and $4.775 billion).The Zacks Consensus Estimate is $4.7 billion.
The company reaffirmed its outlook for 2016 and 2017. 2016 earnings are expected to be in the range of $1.81 to $1.93 per share on revenues of $4.65 billion to $4.8 billion.
Earnings are expected to be in the range of $2.18 to $2.32 per share on revenues of $4.85 billion to $5.05 billion in 2017.
Our Take
We are positive on the company’s new operational efficiency program. We are also impressed with the company beating on earnings and revenues in the second quarter of 2015. However, the negative impact of foreign exchange rates continues to hamper revenues. We expect to see acquisitions/deals at the company in the near future as it continues to focus on its strategy of acquiring complementary businesses and products.
Zoetis carries a Zack Rank #2 (Buy). Other well-ranked stocks in the health care sector are Ligand Pharmaceuticals Incorporated LGND, Valeant Pharmaceuticals International, Inc. VRX and Anacor Pharmaceuticals, Inc. ANAC. While Ligand and Valeant carry a Zacks Rank #1 (Strong Buy), Anacor holds a Zacks Rank #2 (Buy).
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