Zoetis Inc. ZTS is scheduled to report first-quarter 2015 results before the opening bell on May 5. Last quarter, the company posted a positive earnings surprise of 11.11%. The company has recorded positive earnings surprises in three of the four trailing quarters with an average beat of 5.52%. 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.
Zoetis has acquired Abbott Laboratories’ animal health assets for $255 million. This business is focused on the veterinary surgical market. It will strengthen Zoetis’ pain portfolio and sedation product portfolio and complement its diagnostic business. However, foreign currency movements 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 $4.8 billion and $4.9 billion. We could see an update on the same along with the first-quarter results.
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 +5.41%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 39 cents and 37 cents per share, respectively.
Zacks Rank: Zoetis carries a Zacks Rank #4 (Sell). Zoetis’ Zacks Rank #4 when combined with an ESP of +5.41% makes an earnings beat unlikely.
As it is, we caution against stocks with a Zacks Rank #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:
The Earnings ESP for Actavis ACT is +0.78% and it carries a Zacks Rank #2. The company is scheduled to release results on May 11.
Tetraphase Pharmaceuticals, Inc. TTPH has an Earnings ESP of +6.06% and carries a Zacks Rank #3 (Hold). It is expected to report results on May 11.
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