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ELAN or ZTS: Who Is Expected to Report Faster EPS Growth?

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EPS guidance for fiscal 2019

In its fourth-quarter earnings investor presentation, Elanco Animal Health (ELAN) reiterated its fiscal 2019 GAAP and non-GAAP EPS guidance of $0.36–$0.48 and $1.02–$1.12, respectively. According to the company’s fourth-quarter earnings conference call, the company expects lower fiscal 2019 non-GAAP EPS as compared to fiscal 2018 due to higher interest expenses and a higher tax rate.

According to the company’s fourth-quarter earnings conference call, in fiscal 2018, Elanco Animal Health reported adjusted EPS of $1.18 and operational EPS of $1.16. This performance was higher than the fiscal 2018 adjusted EPS guidance of $1.14–$1.16, mainly on account of $0.02 worth of one-time tax benefit associated with the company being a part of Eli Lilly’s (LLY) tax return. Elanco Animal Health, however, doesn’t anticipate this benefit in fiscal 2019.

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According to the company’s fourth-quarter earnings conference call, Zoetis (ZTS) has guided for adjusted diluted EPS and reported diluted EPS, which includes certain expenses associated with the Abaxis acquisition, purchase accounting, and other items, of $3.42–$3.52 and $2.83–$2.99, respectively. The company is expecting a significant impact from the Abaxis acquisition on its financial performance in the first half and to some extent in the third quarter of 2019. Additionally, the company also anticipates the unfavorable revenue impact of 400 basis points and 300 basis points in the first quarter and second quarter of 2019, respectively, due to foreign exchange.

Wall Street’s projections

Wall Street analysts have projected Elanco Animal Health’s non-GAAP EPS to be $1.08, $1.29, and $1.48, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. These estimates imply a YoY change of -8.40%, 19.03%, and 15.40% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

On the other hand, Wall Street analysts have projected Zoetis’s non-GAAP EPS to be $3.47, $3.86, and $4.32, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of 10.82%, 11.29%, and 11.89% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

While Zoetis is expected to report higher YoY non-GAAP EPS growth in fiscal 2019, Elanco Animal Health is expected to grow its non-GAAP EPS at a faster pace in fiscal 2020 and fiscal 2021.

Next, we’ll discuss expense projections for Elanco Animal Health and Zoetis in fiscal 2019.

 

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