Zoetis Stock Is Up Despite Disappointing Forecast. There's a Blockbuster Coming.
Paulo João Lucas
Feb. 13, 2020
The animal-health company Zoetis reported strong fourth-quarter results but initially gave some investors pause with its 2020 guidance.
The animal-health company reported strong fourth-quarter results but initially gave some investors pause with its 2020 guidance.
Shares of Zoetis, the largest animal-health company, were making gains after the company reported strong fourth-quarter results but initially gave some investors pause with its 2020 guidance.
Another worry for the company is the impact of the coronavirus. On a reported basis, Zoetis generated about $200 million, or roughly 3% of its total sales, in China last year. Still, the stock was at around $144 late Thursday morning, up about 0.7% on the session after falling into negative territory earlier.
Zoetis (ticker: ZTS) reported fourth-quarter GAAP earnings of 80 cents a share, up 13% from 71 cents a year earlier. Revenue came in at nearly $1.7 billion, up 7%.
For the full year, the company earned $3.11 a share, compared with $2.93 in 2018, for an increase of 6%. Sales totaled $6.3 billion, up 7%.
“What’s important is that Zoetis continues to execute and outpace the overall markets in which it operates,” says Kevin Ellich, managing partner at Ace Research.
The company’s financial forecasts included 2020 adjusted diluted earnings of $3.90 to $4.00 a share, compared with the Street’s consensus of $4.01.
That includes the impact of currency translation, a big factor for the company. Last year, about half of the company’s sales came from overseas in markets such as Australia, Brazil, Canada, and China. A strong greenback has been a headwind for the company.
As for the impact of the coronavirus, CEO Kristin Peck said during earnings call Thursday morning that “it’s probably too early to tell exactly what the impact will be,” though she did cite some risks the company is monitoring. Those include an overall economic slowdown and any effects the fallout from the virus could have on the company’s supply chain.
The company’s companion-animal business, selling medicines mainly for dogs and cats, continued to drive strong growth.
That unit’s global sales grew by 20% last year to more than $3.1 billion, up 20% on a reported basis. Livestock revenues, in contrast, dropped by 4% to a little more than $3 billion.
In the U.S., 2019 livestock sales fell by 4% to about $1.3 billion.
Peck said the company is “delivering steady performance across our livestock products despite the market challenges some of our customers face from economic conditions, emerging infectious diseases and natural disasters.”
The companion-animal unit should get a boost from the Simparica Trio, a chewable triple combination parasiticide for dogs that has received regulatory approval in the European Union and Canada. Zoetis is expecting to receive U.S. approval for the product in the first quarter.
The company’s guidance includes the pill generating $150 million of additional revenue for the final three quarters of this year.
Administered once a month, the pill is a preventative for heartworm disease and used to treat and control ticks, fleas, and intestinal nematodes in dogs. It could simplify life for pet owners, who now have to give their animals multiple drugs for those purposes.
The stock has performed well, with a one-year return of about 50%, easily outpacing the S&P 500’s 24% result.
Zoetis spun off from Pfizer (PFE) in 2013.
Write to Lawrence C. Strauss at firstname.lastname@example.org
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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