Zoetis Announces Third Quarter 2019 Results

 

Source: Zoetis Inc.

via Business Wire/Yahoo Finance - November 7, 2019

 

PARSIPPANY, N.J.--(BUSINESS WIRE)--

 

    Reports Revenue of $1.6 Billion, Growing 7%, and Net Income of $433 Million, or $0.90 per Diluted Share, Increasing 25% and 27%, Respectively, on a Reported Basis for Third Quarter 2019

    Reports Adjusted Net Income of $455 Million, or Adjusted Diluted EPS of $0.94, for Third Quarter 2019

    Delivers 9% Operational Growth in Revenue and 10% Operational Growth in Adjusted Net Income for Third Quarter 2019

    Updates Full Year 2019 Revenue Guidance to $6.200 - $6.250 Billion and Diluted EPS of $2.99 - $3.08 on a Reported Basis, or $3.57 - $3.62 on an Adjusted Basis

 

Zoetis Inc. (ZTS) today reported its financial results for the third quarter of 2019 and updated its guidance for full year 2019.

 

The company reported revenue of $1.6 billion for the third quarter of 2019, an increase of 7% compared with the third quarter of 2018. Net income for the third quarter of 2019 was $433 million, or $0.90 per diluted share, an increase of 25% and 27%, respectively, on a reported basis.

 

Adjusted net income1 for the third quarter of 2019 was $455 million, or $0.94 per diluted share, an increase of 13%, on a reported basis. Adjusted net income for the third quarter of 2019 excludes the net impact of $22 million for purchase accounting adjustments, acquisition-related costs and certain significant items.

 

On an operational2 basis, revenue for the third quarter of 2019 increased 9%, excluding the impact of foreign currency. Adjusted net income for the third quarter of 2019 increased 10% operationally, excluding the impact of foreign currency.

 

EXECUTIVE COMMENTARY

 

“Our strong performance continues, with 9% operational revenue growth in the third quarter,” said Juan Ramón Alaix, Chief Executive Officer at Zoetis. “Our companion animal portfolio is once again the main driver of our results, growing 23% operationally based on strong sales of our parasiticide products, our key dermatology portfolio, and diagnostic revenue from the Abaxis acquisition. Livestock sales declined 4% operationally due to lower product sales in cattle, swine and fish, which were partially offset by growth in poultry.”

 

“We remain confident that our diverse portfolio, innovations, and core business are performing well and will continue to drive growth in the future. On a personal note, as I retire at the end of this year, I feel very positive about what lies ahead for Zoetis. Under the leadership of Kristin Peck, who has been named our next CEO, I know that our talented colleagues and experienced management team will continue to capitalize on growth opportunities to create significant value for our company, customers and shareholders,” said Alaix.

 

QUARTERLY HIGHLIGHTS

 

Zoetis organizes and manages its commercial operations across two segments: United States (U.S.) and International. Within these segments, the company delivers a diverse portfolio of products for companion animals and livestock, tailored to local trends and customer needs. In the third quarter of 2019:

 

    Revenue in the U.S. segment was $844 million, an increase of 11% compared with the third quarter of 2018. Sales of companion animal products increased 26%, driven primarily by growth in the company’s parasiticides portfolio across the ProHeart®, Revolution® and Simparica® franchises, including new product introductions, notably Revolution Plus for cats and ProHeart 12 for dogs. Increased sales across our key dermatology portfolio and revenue from the acquisition of Abaxis also contributed to growth. Sales of livestock products declined 9%, as a result of continued weakness across both the beef and dairy cattle sectors, as well as the timing of promotional activities in swine. Growth in poultry products was driven primarily by increased sales of alternatives to antibiotics in medicated feed additives.

 

    Revenue in the International segment was $721 million, an increase of 2% on a reported basis and an increase of 5% operationally compared with the third quarter of 2018. Sales of companion animal products grew 12% on a reported basis and 16% on an operational basis. Growth resulted primarily from increased sales across our key dermatology portfolio, the acquisition of Abaxis, and parasiticides including Simparica and Stronghold® Plus. Sales of livestock products declined 4% on a reported basis and 1% operationally. This decline was the result of the ongoing impact of African Swine Fever in China, and, to a lesser extent, other markets in Asia, which more than offset growth in the cattle and poultry portfolios. Growth in cattle products was driven by favorable market conditions in key markets including Mexico, the U.K. and Canada, but was negatively impacted by an unfavorable comparison to the prior year, which benefited from the end of the national trucking strike in Brazil. Growth in poultry products was the result of increased sales in key markets, including China, Australia and Brazil.

 

INVESTMENTS IN GROWTH

 

Zoetis diversifies and grows its business through the introduction of new products, lifecycle innovations, business development initiatives, and entries into new markets and technologies. The company is increasingly focused on developing integrated solutions for pet owners, veterinarians and farmers that span the continuum of animal healthcare - helping to predict, prevent, detect and treat diseases.

 

Since our last quarterly earnings announcement, Zoetis received approval in the European Union and Canada for its three-way combination parasiticide for dogs, Simparica Trio™ (sarolaner/moxidectin/pyrantel) chewable tablets and anticipates launching in these markets in the first quarter of 2020. Regulatory reviews are also underway in the U.S., Australia, Brazil and Japan, with further submissions expected globally.

 

The company also continues to enhance its vaccine portfolio for livestock. In October, Zoetis received United States Department of Agriculture (USDA) approval for Poulvac® Procerta™ HVT-ND, the company’s first vector vaccine that will help protect against Marek’s disease and Newcastle disease, highly contagious viral infections affecting poultry. The product is the first in what the company expects to become an important new global poultry vaccine franchise over the next several years. In cattle, the company continues to expand the Bovi-Shield® vaccine franchise in important markets with the approval of Bovi-Shield Gold One Shot™ in Brazil. This vaccine, approved in the U.S. in 2013, as well as in Canada and Mexico, helps prevent certain bovine respiratory diseases.

 

In addition to new product approvals and lifecycle innovations, Zoetis continues to support future growth through business development activities. The company announced last week that it has completed the acquisition of Phoenix Lab as an entry to the veterinary reference laboratory space. The acquisition will further build upon Zoetis’ 2018 purchase of Abaxis, a leading provider of veterinary point-of-care diagnostic instruments. Headquartered near Seattle, Phoenix Lab brings Zoetis a reference laboratory highly valued by veterinarians for quality assurance and customer care.

 

FINANCIAL GUIDANCE

 

Zoetis is updating its full year 2019 guidance, which includes:

 

    Revenue between $6.200 billion and $6.250 billion

    Reported diluted EPS between $2.99 and $3.08

    Adjusted diluted EPS between $3.57 and $3.62

 

This guidance reflects foreign exchange rates as of late October. Additional details on guidance are included in the financial tables and will be discussed on the company's conference call this morning.

 

WEBCAST & CONFERENCE CALL DETAILS

 

Zoetis will host a webcast and conference call at 8:30 a.m. (ET) today, during which company executives will review third quarter 2019 results, discuss financial guidance and respond to questions from financial analysts. Investors and the public may access the live webcast by visiting the Zoetis website at http://investor.zoetis.com/events-presentations. A replay of the webcast will be archived and made available on Nov. 7, 2019.

 

About Zoetis

 

Zoetis is the leading animal health company, dedicated to supporting its customers and their businesses. Building on more than 65 years of experience in animal health, Zoetis discovers, develops, manufactures and commercializes medicines, vaccines and diagnostic products, which are complemented by biodevices, genetic tests and a range of services. Zoetis serves veterinarians, livestock producers and people who raise and care for farm and companion animals with sales of its products in more than 100 countries. In 2018, the company generated annual revenue of $5.8 billion with approximately 10,000 employees. For more information, visit www.zoetis.com.

 

1 Adjusted net income and its components and adjusted diluted earnings per share (non-GAAP financial measures) are defined as reported net income attributable to Zoetis and reported diluted earnings per share, excluding purchase accounting adjustments, acquisition-related costs and certain significant items.

2 Operational revenue growth (a non-GAAP financial measure) is defined as growth excluding the impact of foreign exchange.

 

DISCLOSURE NOTICES

 

Forward-Looking Statements: This press release contains forward-looking statements, which reflect the current views of Zoetis with respect to business plans or prospects, future operating or financial performance, future guidance, future operating models, expectations regarding products, product approvals or products under development, expected timing of product launches, expectations regarding the performance of acquired companies and our ability to integrate new businesses, expectations regarding the financial impact of acquisitions, future use of cash and dividend payments, tax rate and tax regimes, changes in the tax regimes and laws in other jurisdictions, and other future events. These statements are not guarantees of future performance or actions. Forward-looking statements are subject to risks and uncertainties. If one or more of these risks or uncertainties materialize, or if management's underlying assumptions prove to be incorrect, actual results may differ materially from those contemplated by a forward-looking statement. Forward-looking statements speak only as of the date on which they are made. Zoetis expressly disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, including in the sections thereof captioned “Forward-Looking Statements and Factors That May Affect Future Results” and “Item 1A. Risk Factors,” in our Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K. These filings and subsequent filings are available online at www.sec.gov, www.zoetis.com, or on request from Zoetis.

 

Use of Non-GAAP Financial Measures: We use non-GAAP financial measures, such as adjusted net income, adjusted diluted earnings per share and operational results (which exclude the impact of foreign exchange), to assess and analyze our results and trends and to make financial and operational decisions. We believe these non-GAAP financial measures are also useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this press release should not be considered alternatives to measurements required by GAAP, such as net income, operating income, and earnings per share, and should not be considered measures of liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this press release and are posted on our website at www.zoetis.com.

 

Internet Posting of Information: We routinely post information that may be important to investors in the 'Investors' section of our website at www.zoetis.com, on our Facebook page at http://www.facebook.com/zoetis and on Twitter@zoetis. We encourage investors and potential investors to consult our website regularly and to follow us on Facebook and Twitter for important information about us.

 

ZOETIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(a)

(UNAUDITED)

(millions of dollars, except per share data)

 

more, including financial tables

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