Zoetis Inc. (ZTS) is a leading pharmaceutical company that emphasizes the discovery, development, manufacturing, and commercialization of animal health medicines, vaccines, and diagnostic products and services worldwide. The company’s last reported financial reports beat the analysts’ estimates. Its revenue of $2.39 billion surpassed the consensus estimate of $2.29 billion.

The company’s strong revenue growth was driven primarily by sales of companion animal products, up 18% year-over-year, drawn by monoclonal antibody (mAb) products for osteoarthritis (OA) pain, Librela® for dogs, and Solensia® for cats. Further, Simparica Trio®, Apoquel®, and Cytopoint® also contributed to the growth during the quarter.

Recently, ZTS received approval in China for Apoquel® Chewable (oclacitinib chewable tablet) for controlling pruritus associated with allergic dermatitis and control of atopic dermatitis in dogs. Also, Revolution® Plus (selamectin/sarolaner), a topical combination product received approval in the EU for an additional claim related to efficacy against notoedres mange.

Besides, Zoetis is also working strategically to expand its operations in diverse locations and strategically divestiture in order to optimize its scope of operations. The company expanded its presence in India with a Capability Center in Hyderabad. The Center will play a vital role in driving digital transformation and improving efficiencies.

Also, it completed the divestiture of its medicated feed additive (MFA) product portfolio, certain water-soluble products, and related assets to Phibro Animal Health. Such well-thought-out measures will enhance the company’s future growth and prosperity. Further, the company’s product demand will grow exponentially with more people concerned about animal health and surging market demand.

The company raised its financial guidance for the full year 2024. ZTS forecasts revenue of $9.20 billion to $9.30 billion, representing operational growth of 10% to 11%. Its adjusted EPS is projected to be between $5.86 and $5.92. Further, the company’s adjusted net income is expected to be $2.67 billion – $2.69 billion.

Shares of ZTS have plunged 4.2% over the past six months to close the last trading session at $164.70.

Let’s look at factors that could influence ZTS’ performance in the upcoming months.

Stable Financials

For the third quarter that ended September 30, 2024, ZTS reported revenue of $2.39 billion, up 11% from the prior year’s quarter. Its non-GAAP gross profit increased 11.4% from the year-ago value to $1.69 billion.

Furthermore, non-GAAP net income attributable to Zoetis amounted to $716 million or $1.58 per share, reflecting increases of 13.8% and 16.2% from the prior-year quarter, respectively.

Impressive Historical Growth

ZTS’ revenue and EBITDA have grown at a CAGR of 6.3% over the past three years, respectively. Its EBIT increased at a CAGR of 6.8% over the same period, while the company’s net income and EPS grew at respective CAGRs of 7% and 8.6% over the same time frame.

Also, the company’s tangible book value and levered free cash flow increased at CAGRs of 47.8% and 9.1% over the same timeframe.

Favorable Analyst Estimates

Analysts expect ZTS’ revenue for the fourth quarter (ending December 2024) to come in at $2.33 billion, indicating an increase of 5.2% year-over-year, and the consensus EPS estimate of $1.36 for the same period indicates an improvement of 9.4% year-over-year. Moreover, the company has surpassed the consensus revenue estimates in all of the trailing four quarters.

For the fiscal year (ending December 2024), the company’s EPS is anticipated to grow 10.5% year-over-year to $5.88, while its revenue is expected to increase 8.5% year-over-year to $9.27 billion. In addition, Street expects its revenue and EPS for the fiscal year 2025 to grow 5% and 9% from the prior year to $9.73 billion and $6.41, respectively.

High Profitability

ZTS’ trailing-12-month EBIT margin of 36.48% is significantly higher than the 2.76% industry average. Its trailing-12-month gross profit margin of 70.09% is 20.4% higher than the industry average of 58.23%. Likewise, the stock’s trailing-12-month levered FCF margin of 20.46% is 891.7% higher than the industry average of 2.06%.

POWR Ratings Reflect Promise

ZTS’ robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZTS has a B grade for Sentiment and Quality, which is consistent with its encouraging analysts’ expectations and higher-than-industry profitability.

Also, with a 5-year beta of 0.90, the stock has earned a B grade for Stability.

ZTS is ranked #21 among the 149 stocks in the Medical – Pharmaceuticals industry.

Beyond what I have stated above, we have also given ZTS grades for Growth, Value, and Momentum. Click here to access all ZTS ratings.

Bottom Line

ZTS is a leading animal health-focused pharmaceutical company. Its innovative products and broadening product choices are attracting more and more customers, as is reflected in its strong revenue growth across different segments. Also, the company’s strategic initiatives and measures are adding more opportunities for its operations and scale.

Considering the company’s strong financials, accelerating profitability, and robust growth outlook, it could be wise to invest in ZTS.

How Does Zoetis Inc. (ZTS) Stack Up Against Its Peers?

While ZTS has an overall POWR Rating of B, investors could also check out these other stocks within the Medical – Pharmaceuticals industry with A (Strong Buy) or B (Buy) ratings: Bristol-Myers Squibb Co. (BMY), Supernus Pharmaceuticals, Inc. (SUPN), and Taro Pharmaceutical Industries Ltd. (TARO).

For exploring more A and B-rated medical stocks, click here.

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ZTS shares were trading at $164.93 per share on Thursday afternoon, up $0.23 (+0.14%). Year-to-date, ZTS has declined -15.61%, versus a 28.24% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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