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Animal-Health Outlet Fetches Earnings Beat — So Why Is The Stock Flat?

Animal-health giant Zoetis (ZTS) topped earnings forecasts Thursday, but Zoetis stock was largely unmoved by in-line sales and narrowed 2019 guidance.

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On the stock market today, Zoetis stock edged down 0.4%, to 121.05, in above-average volume. Shares are meeting some resistance at their 50-day moving average. Zoetis stock ranks third in its industry group of pharmaceutical companies.

Zoetis sells products for pets and livestock. The third quarter continued a trend of strong pet product sales while livestock sales remained weak, UBS analyst Navin Jacob said in a report to clients. Dairy and beef segments in the U.S. are still sluggish, while the African swine fever is impacting Asia.

"Companion animal again beat expectations but livestock performance in the U.S. and international was weak," he said. "The results are fine and tiny (earnings per share) guidance raise is modest positive as we didn't expect a bump in guidance due to headwinds in livestock."

Zoetis Earnings Top Expectations

For the third quarter ended Sept. 30, adjusted Zoetis earnings were 94 cents a share, up 13%. That topped the estimate of analysts surveyed by Zacks Investment Research for 89 cents. But sales were just in line at $1.58 billion. Sales grew 7% year over year.

Globally, livestock product sales slipped 6% to $731 million. Meanwhile, sales of products to help pets jumped 21% to $834 million.

(Related: See Spot Fetch $45 Billion From The Animal-Health Industry.)

In the U.S., livestock generated $294 million, sliding 9%. But companion animal sales popped 26% to $550 million. Internationally, livestock sales were $437 million, down 4%. Meanwhile, companion animal sales rose 12% to $284 million.

The pain was acute in sales of products for cattle and swine, which missed by a respective 10% and 8%, UBS' Jacob said. But in the U.S., companion animal sales beat expectations by 10%, though international sales were just in line with estimates.

Zoetis also narrowed its outlook for the year. Now, the animal-health company expects to earn $3.57-$3.62 per share on $6.2 billion to $6.25 billion revenue. Previously, Zoetis expected adjusted profit of $3.53-$3.60 a share on $6.175 billion to $6.275 billion in sales.

Analysts expected Zoetis earnings of $3.57 a share on $6.24 billion in sales.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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