Zoetis Inc. (ZTS) is scheduled to report fourth-quarter 2014 results before the opening bell on Feb 11. Last quarter, the company posted a positive earnings surprise of 10.81%. The company has recorded positive earnings surprises in three of the four trailing quarters with an average beat of 3.45%. Let’s see how things are shaping up for this announcement.
Factors at Play this Quarter
Zoetis’ robust and diversified product portfolio should help support revenues. The company’s livestock segment should continue to do well. We note that Zoetis is the former Animal Health business of Pfizer Inc. (PFE). The company is working on building global manufacturing and supply functions, which may lead to higher costs.
For 2014, the company expects adjusted earnings per share in the range of $1.50 to $1.54 on revenues of $4.7 billion to $4.75 billion. Although, foreign currency movements did not have any significant impact on revenues in the third quarter, it can prove to be a threat this quarter.
For 2015, excluding one-time items, earnings are expected to be in the range of $1.61 to $1.68 per share. The company expects revenues to be between $4.85 billion and $4.95 billion. We could see an update on the same along with the fourth quarter results. An update on the company’s $500 million share repurchase program as well as Abbott Laboratories’ (ABT) deal is also expected on the call. Zoetis has entered into an agreement with Abbott Labs to buy the latter’s animal health assets for $255 million.
Earnings Whispers?
Our proven model does not conclusively show that Zoetis is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Zoetis is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 36 cents per share.
Zacks Rank: Zoetis carries a Zacks Rank #4 (Sell). Zoetis’ Zacks Rank #4 when combined with an ESP of 0.00% makes an earnings beat unlikely.
As it is, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements:
Acorda Therapeutics, Inc. (ACOR) has an Earnings ESP of +106.67% and a Zacks Rank #3 (Hold). The company is expected to release results on Feb 12.
Actavis (ACT) has an earnings ESP of +4.38% and carries a Zacks Rank #2 (Buy). The company is expected to release fourth-quarter 2014 results on Feb 18.
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