Zoetis Inc. ZTS is scheduled to report third-quarter 2015 results before the opening bell on Nov 3. Last quarter, the company had posted a positive earnings surprise of 13.16%. The company has recorded positive earnings surprises in all of the four trailing quarters with an average beat of 11.47%. 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 companion animal and livestock segment should continue to do well. The addition of Abbott Laboratories’ ABT Animal Health business, Apoquel and other new products should have driven the top line. Zoetis acquired Abbott animal health assets in Feb 2015, in a bid to strengthen its pain and sedation product portfolio, and the diagnostic business. The company announced comprehensive operational efficiency initiatives, which are expected to generate cost savings of approximately $300 million by 2017.
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 $1.63 to $1.68 per share (previous guidance: $1.61 to $1.68 per share). The company expects revenues to be between $4.7 billion and $4.775 billion. We may see an update on the same along with the third-quarter results.
What Our Model Indicates
Our proven model does not conclusively show that Zoetis is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -2.50%. This is because the Most Accurate estimate is 39 cents while the Zacks Consensus Estimate stands at 40 cents per share.
Zacks Rank: Zoetis currently carries a Zacks Rank #4 (Sell). The company’s Zacks Rank #4 along with a negative ESP makes a beat unlikely this season.
Stocks That Warrant a Look
Here are a few health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Alnylam Pharmaceuticals, Inc. ALNY is +2.31% and it carries a Zacks Rank #3. The company is expected to release results on Nov 4.
Merrimack Pharmaceuticals, Inc. MACK has an Earnings ESP of +2.44% and a Zacks Rank #3. It is expected to release results on Nov 9.
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