Zoetis (ZTS) Stock Rallies Despite Weak Earnings Anticipation

Zoetis (ZTS) is scheduled to release its third quarter fiscal 2015 earnings results on Tuesday before the market opens.
By U-Jin Lee ,

NEW YORK (TheStreet) -- Zoetis (ZTS) - Get Report is scheduled to release its third quarter fiscal 2015 earnings results on Tuesday before the market opens.

Profit and sales are projected to fall year-over-year. 

Analysts are expecting the company to earn 40 cents a share on revenue of $1.18 billion.

In the same period the year before, the company earned 41 cents a share on revenue of $1.21 billion.

Foreign exchange rates and Zoetis' high debt levels may put pressure on its latest quarterly results, according to Zacks Equity Research.

However, one upside is the company's operational efficiency initiatives.

Zoetis shares are rising 2.81% to $44.22 on Monday. 

Based in Florham Park, NJ, Zoetis engages in the discovery, development, manufacture, and commercialization of animal health medicines and vaccines for livestock and companion animals worldwide.

Separately, TheStreet Ratings team rates ZOETIS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

We rate ZOETIS INC (ZTS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ZTS's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for ZOETIS INC is rather high; currently it is at 68.36%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.13% is in-line with the industry average.
  • ZOETIS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ZOETIS INC increased its bottom line by earning $1.16 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.16).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 127.2% when compared to the same quarter one year ago, falling from $136.00 million to -$37.00 million.
  • The debt-to-equity ratio is very high at 3.10 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ZTS maintains a poor quick ratio of 0.98, which illustrates the inability to avoid short-term cash problems.
  • You can view the full analysis from the report here: ZTS
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