Core Insights - Zoetis Inc. is a leading company in the animal health industry, offering a variety of products and services for both pets and livestock, with a focus on innovative solutions in parasiticides, diagnostics, and dermatology [1] Financial Performance - In Q3 2025, Zoetis reported an adjusted earnings per share (EPS) of $1.70, exceeding the consensus estimate of $1.62 [2][6] - The adjusted net income for the company reached $754 million, marking a 5% increase on a reported basis and a 9% rise on an organic operational basis [3] - Total sales for Zoetis amounted to $2.4 billion, reflecting a 1% year-over-year increase, although slightly below the expected $2.41 billion [3] Market Position and Challenges - Despite facing challenges with monoclonal antibody products for osteoarthritis pain, such as Librela and Solensia, which saw a decline in sales, Zoetis continues to maintain a strong market presence [4][6] - Sales of livestock products decreased by 9% due to the divestiture of the medicated feed additive product portfolio [4] - The stock price for Zoetis is currently at $126.06, down approximately 12.67% from its previous high, with a market capitalization of around $55.87 billion [5]

Revenue and Income - Total revenue for the three months ended September 30, 2025, increased by $12 million, or 1%, compared to the same period in 2024, with operational revenue growth being flat [129]. - For the nine months ended September 30, 2025, total revenue increased by $141 million, or 2%, compared to the same period in 2024, with operational revenue growth of $206 million, or 3% [130]. - Net income attributable to Zoetis for the three months ended September 30, 2025, was $721 million, a 6% increase from $682 million in 2024 [128]. - Adjusted net income for the nine months ended September 30, 2025, was $2,070 million, reflecting a 9% increase from $1,905 million in 2024 [128]. - Adjusted net income for the three months ended September 30, 2025, was $754 million, a 5% increase from $716 million in the same period of 2024 [184]. - Non-GAAP adjusted diluted EPS for the three months ended September 30, 2025, was $1.70, an 8% increase from $1.58 in the same period of 2024 [185]. Expenses and Costs - The cost of sales as a percentage of revenue decreased to 28.5% for the three months ended September 30, 2025, compared to 29.4% in 2024 [128]. - Selling, general and administrative (SG&A) expenses increased by $14 million, or 2%, to $579 million in Q3 2025, maintaining 24% of revenue [135]. - Research and development (R&D) expenses rose by $3 million, or 2%, to $170 million in Q3 2025, consistent at 7% of revenue [139]. - Cost of sales decreased to $683 million in Q3 2025, representing 28.5% of revenue, down from 29.4% in Q3 2024 [132]. - SG&A expenses for the nine months ended September 30, 2025, increased by $66 million, or 4%, totaling $1,759 million [135]. - Cost of sales for the nine months ended September 30, 2025, was $1,954 million, or 27.6% of revenue, compared to 29.0% in the prior year [132]. Taxation - The effective tax rate for the three months ended September 30, 2025, was 18.7%, down from 20.8% in 2024 [128]. - The effective tax rate for the nine months ended September 30, 2025, was 20.4%, slightly up from 20.2% in the same period of 2024 [152]. - Provision for taxes on income was $166 million in Q3 2025, with an effective tax rate of 18.7%, down from 20.8% in Q3 2024 [151]. - The effective tax rate on adjusted pre-tax income was 18.6% for the three months ended September 30, 2025, compared to 20.8% for the same period in 2024 [184]. Segment Performance - U.S. segment revenue decreased by $24 million, or 2%, in Q3 2025, primarily due to a $25 million reduction in livestock products [156]. - International segment revenue increased by $34 million in Q3 2025, with operational revenue growth of $12 million, or 1%, driven by a $25 million increase in companion animal products [158]. - U.S. segment earnings increased by $10 million, or 1%, in Q3 2025, primarily due to higher gross profit [157]. - International segment earnings increased by $14 million, or 3%, in Q3 2025, primarily due to higher gross profit [160]. - U.S. segment revenue increased by $44 million, or 1%, in the nine months ended September 30, 2025, reflecting a $172 million increase in companion animal products [161]. - International segment revenue increased by $70 million in the nine months ended September 30, 2025, with operational revenue growth of $134 million, or 4% [163]. - U.S. segment earnings increased by $91 million, or 4%, in the nine months ended September 30, 2025, primarily due to higher gross profit [162]. - International segment earnings increased by $95 million, or 6%, in the nine months ended September 30, 2025, primarily due to higher gross profit [164]. Cash Flow and Liquidity - For the nine months ended September 30, 2025, net cash provided by operating activities was $2,011 million, a decrease of $37 million compared to $2,048 million for the same period in 2024 [200]. - The company reported a net cash used in investing activities of $582 million for the nine months ended September 30, 2025, compared to $441 million in 2024, primarily due to capital expenditures [201]. - Net cash used in financing activities was $1,375 million for the nine months ended September 30, 2025, a decrease of $540 million from $1,915 million in 2024, mainly due to the repayment of senior notes and the purchase of treasury shares [202]. - Cash and cash equivalents increased to $2,084 million as of September 30, 2025, up from $1,987 million at December 31, 2024 [204]. - The company's working capital improved to $4,776 million as of September 30, 2025, compared to $2,574 million at December 31, 2024, reflecting a stronger liquidity position [204]. - The ratio of current assets to current liabilities increased to 3.64:1 as of September 30, 2025, compared to 1.75:1 at December 31, 2024, indicating improved short-term financial health [204]. Debt and Financing - The company has outstanding debt securities totaling approximately $6.55 billion, with varying interest rates from 2.000% to 5.600% [212]. - The 2017 Senior Notes due 2027 amount to $750 million with a 3.000% interest rate, while the 2022 Senior Notes due 2032 total $750 million with a 5.600% interest rate [212]. - Moody's rates the company's long-term debt as A3 with a stable outlook, while S&P rates it as BBB+ with a stable outlook [214]. - The company entered into a new $1.3 billion senior unsecured revolving credit facility in August 2025, which expires in December 2027, with the option to increase to $1.75 billion [205]. - As of September 30, 2025, the company was in compliance with all financial covenants related to its credit facility [206]. Market Risks - The company is subject to risks from changes in foreign exchange rates and interest rates, which could impact earnings [221]. - The company has a significant exposure to market risks, including foreign exchange and interest rate fluctuations [221]. - The company’s financial risk management program aims to manage the impact of foreign exchange and interest rate movements on earnings [221]. - The company may indemnify counterparties against certain liabilities, but historically, it has not paid significant amounts under these provisions [216]. - The company is required to make an offer to repurchase senior notes at 101% of the aggregate principal amount under certain conditions [211]. Other Business Activities - Other business activities net loss increased by $3 million in Q3 2025, reflecting increased compensation-related costs and depreciation expense [166]. - Other business activities net loss decreased by $8 million in the nine months ended September 30, 2025, due to a decrease in R&D costs and improved contract manufacturing results [167]. - Other unallocated expenses increased by $12 million, or 17%, in the three months ended September 30, 2025, primarily due to higher manufacturing costs and unfavorable foreign exchange [171]. - Corporate expenses increased by $5 million, or 1%, in the nine months ended September 30, 2025, primarily due to an increase in compensation-related costs [172]. - Other unallocated expenses increased by $29 million, or 14%, in the nine months ended September 30, 2025, primarily due to higher manufacturing costs [173].

Core Insights - Zoetis Inc. reported a third-quarter 2025 adjusted earnings per share of $1.70, surpassing the consensus estimate of $1.62 [1] - The company reaffirmed its 2025 adjusted earnings guidance of $6.30-$6.40 per share, slightly above the consensus of $6.35 [2] - Sales for the quarter were $2.4 billion, reflecting a 1% year-over-year increase but falling short of the consensus estimate of $2.41 billion [4] Financial Performance - Adjusted net income for the quarter was $754 million, marking a 5% increase on a reported basis and a 9% rise on an organic operational basis [1] - The company updated its full-year 2025 sales guidance, lowering it from $9.45 billion-$9.60 billion to $9.4 billion-$9.475 billion, compared to the consensus of $9.52 billion [4] - Organic operational growth expectations were revised down from 6.5%-8.0% to 5.5%-6.5% [4] Market and Competitive Landscape - Companion animal organic growth was reported at 2%, which is below expectations and one of the lowest figures seen in years, raising concerns about competition [2] - Analysts predict that the companion animal growth rate will need to increase from low- to high-single-digit growth amid rising competition, with estimates around 7% for 2026 [2] - Sales of livestock products declined by 9% on a reported basis, primarily due to the divestiture of the medicated feed additive product portfolio [4] Stock Performance - Following the earnings report, Zoetis stock experienced a decline of 13.14%, trading at $125.39 [3]

Core Insights - Zoetis, Inc. (ZTS) reported third-quarter 2025 adjusted earnings of $1.70 per share, exceeding the Zacks Consensus Estimate of $1.62, while total revenues grew 1% year over year to $2.4 billion, missing the estimate of $2.41 billion [1][7] Financial Performance - U.S. revenues decreased 2% year over year to $1.32 billion, missing both the Zacks Consensus Estimate of $1.34 billion and the model estimate of $1.38 billion [3][7] - Sales of companion animal products in the U.S. remained flat at $1.07 billion, with growth in parasiticides and dermatology products offset by declines in monoclonal antibody products for osteoarthritis pain [4][7] - Livestock product sales in the U.S. fell 9% to $253 million, primarily due to the divestiture of the medicated feed additive product portfolio [6][9] International Segment - Revenues from the International segment increased 3% year over year to $1.06 billion, surpassing the Zacks Consensus Estimate of $1.04 billion [8] - Ex-U.S. sales of companion animal products rose 8% to $583 million, driven by growth in key products [9] Guidance and Future Outlook - Zoetis has cut its 2025 revenue guidance to $9.4-$9.475 billion from a previous range of $9.45 billion to $9.6 billion, while maintaining adjusted earnings guidance of $6.30-$6.40 per share [10] - The company secured a positive opinion for Lenivia, a long-acting monoclonal antibody therapy for canine osteoarthritis pain, with a final European decision expected in late 2025 [11][13]

Core Viewpoint - Zoetis Inc. (ZTS) has experienced significant underperformance over the past year, with a loss of over 25% in stock value, and a recent weak quarterly report has led to a decline of more than 10% in early trading [1] Company Performance - The stock of Zoetis Inc. has lost over a quarter of its value in the past year [1] - A weak quarterly performance has resulted in a drop of over 10% in the stock price during early trading on Tuesday [1]

Core Insights - Zoetis Inc. (ZTS) has experienced significant underperformance over the past year, with a loss of over 25% in stock value [1] - A disappointing quarterly report led to a decline of more than 10% in early trading on Tuesday [1] Company Performance - The stock has lost over a quarter of its value in the last year, indicating a challenging period for the company [1] - The recent quarterly results were weak, contributing to the sharp decline in stock price [1] Market Reaction - Investors reacted negatively to the quarterly performance, resulting in a notable drop in stock price during early trading [1]

Market Overview - U.S. equity markets are experiencing a midday retreat on November 4, 2025, with major indexes pulling back as investors digest corporate earnings and economic data, alongside cautious sentiment in the technology sector [1][2] - The S&P 500 has declined approximately 1.3% by midday, the Dow Jones Industrial Average is down around 0.9%, and the Nasdaq Composite has seen a drop of 1.5% [2] Economic Data and Events - Investors are monitoring key economic data releases, including U.S. JOLTS Job Openings, International Trade in Goods and Services, and Factory Orders reports [3] - Upcoming reports include the ISM Services Business Activity index and the ADP Employment Change report, which are crucial due to the ongoing U.S. government shutdown [4] Technology Sector Performance - Palantir Technologies shares fell between 8% and 10% despite exceeding earnings forecasts and raising revenue guidance, attributed to profit-taking and concerns over high valuation [6] - Other tech stocks like Nvidia and Microsoft also experienced declines, with Nvidia down 1.7% to 2.8% and Microsoft down 0.7% [6] Automotive and Consumer Discretionary - Tesla shares slid 2.7% after Norway's sovereign wealth fund announced intentions to vote against CEO Elon Musk's compensation package [7] - Norwegian Cruise Line saw an 11% drop following a mixed earnings report and forecast [7] Earnings Reactions - Zoetis shares plunged 13% after revising its sales forecast downwards, while IDEXX Laboratories surged 14.8% after reporting strong earnings [8] - Ferrari announced a 7.4% year-over-year increase in net revenues, with diluted earnings per share reaching Euro 2.14 [9] Upcoming Earnings - Key companies scheduled to report earnings include Advanced Micro Devices, Shopify Inc., Arista Networks, Uber Technologies, Amgen, Eaton Corporation, Pfizer, and Spotify Technology [10]

Financial Data and Key Metrics Changes - The company reported $2.4 billion in revenue for Q3 2025, growing 1% on a reported basis and 4% on an organic operational basis, primarily driven by price, as volume was flat [19][5][15] - Adjusted net income was $754 million, reflecting a 5% increase on a reported basis and a 9% increase on an organic operational basis [19][30] - Adjusted gross margins improved to 71.6%, growing 90 basis points on a reported basis [29][30] Business Line Data and Key Metrics Changes - The global companion animal portfolio generated $1.7 billion in revenue, growing 2% operationally, with the parasiticide franchise contributing $356 million (7% growth) and key dermatology posting $469 million (3% growth) [20][19] - The osteoarthritis (OA) pain franchise declined 11% operationally to $138 million, with Librela sales down 15% globally [20][10] - The global livestock portfolio grew 10% on an organic operational basis, contributing $725 million in revenue [20][13] Market Data and Key Metrics Changes - In the U.S., revenue decreased 2% on a reported basis but increased 3% on an organic operational basis, with companion animal flat and livestock growing 14% [21][19] - International revenue grew 3% on a reported basis and 6% on an organic operational basis, with companion animal growing 4% and livestock growing 8% [26][19] Company Strategy and Development Direction - The company is focused on a multi-pronged strategy to return Librela to growth, including increasing awareness of OA as a serious disease and deepening education with specialists and veterinarians [10][11] - The company is evolving its U.S. commercial structure to enhance agility and efficiency, aiming for a leaner field organization [12][13] - The company anticipates a major new market approval each year for the next several years, highlighting its robust innovation pipeline [11][16] Management's Comments on Operating Environment and Future Outlook - Management noted that therapeutic visits have been declining, impacting new patient starts, and emphasized the importance of addressing this trend for future growth [36][66] - The company remains confident in its long-term growth trajectory, supported by a diversified portfolio and strong market fundamentals [15][31] - Management updated full-year guidance, revising organic operational revenue growth to a range of 5.5%-6.5% [15][30] Other Important Information - The company announced the retirement of Rob Polzer, head of R&D, and the appointment of Kevin Esch as his successor [17][16] - The company is investing in manufacturing excellence to support its expanding portfolio, including a new biologics facility [12][11] Q&A Session Summary Question: What changed interquarterly after raising guidance last quarter? - Management noted anticipated deceleration in the second half of the year, competitive launch dynamics, and macro impacts on U.S. clinics as key factors [35][36] Question: How is the competitive landscape affecting the dermatology category? - Management acknowledged competitive pressures but emphasized that patient share gains from competitors have been limited [42][66] Question: What is the outlook for therapeutic visits and when might recovery occur? - Management indicated that therapeutic visits have been declining, impacting patient starts, and recovery timing remains uncertain [66][63] Question: How durable are the growth drivers in livestock? - Management expressed confidence in the sustainability of livestock growth driven by increased protein demand and urbanization trends [72][71] Question: What lessons have been learned from Librela's launch for upcoming products? - Management plans to apply learnings from Librela to new launches, focusing on education and awareness of OA [58][57]

Financial Data and Key Metrics Changes - The company reported $2.4 billion in revenue for Q3 2025, growing 1% on a reported basis and 4% on an organic operational basis, primarily driven by price, as volume was flat [19][5] - Adjusted net income was $754 million, reflecting a 5% increase on a reported basis and a 9% increase on an organic operational basis [19][5] - Adjusted gross margins improved to 71.6%, growing 90 basis points on a reported basis [29] Business Line Data and Key Metrics Changes - The global companion animal portfolio generated $1.7 billion in revenue, growing 2% operationally, with the parasiticide franchise contributing $356 million (7% growth) and key dermatology posting $469 million (3% growth) [20][5] - The osteoarthritis (OA) pain franchise declined 11% operationally to $138 million, with Librela sales down 15% globally [10][20] - The global livestock portfolio grew 10% on an organic operational basis, contributing $725 million in revenue [20][13] Market Data and Key Metrics Changes - In the U.S., revenue decreased by 2% on a reported basis but increased by 3% on an organic operational basis, with companion animal flat and livestock growing 14% [21][19] - International revenue grew 3% on a reported basis and 6% on an organic operational basis, with companion animal growing 4% and livestock growing 8% [26][19] Company Strategy and Development Direction - The company is focused on a multi-pronged strategy to return Librela to growth, including increasing awareness of OA as a serious disease and deepening education with specialists and veterinarians [10][11] - The company is evolving its U.S. commercial structure to enhance agility and efficiency, aiming for a leaner field organization [12][13] - The livestock segment is expected to continue demonstrating above-market growth, driven by rising protein consumption and urbanization trends [14][72] Management's Comments on Operating Environment and Future Outlook - Management noted that therapeutic visits have been declining, impacting new patient starts, and emphasized the importance of these visits for growth [35][46] - The company anticipates a return to growth in 2026, particularly for Librela, as signs of stabilization are observed [36][70] - The guidance for full-year revenue has been revised to a range of $9.4 billion to $9.475 billion, reflecting a more measured view of macro and operational trends [30][15] Other Important Information - The company announced the retirement of Rob Polzer, head of R&D, and the appointment of Kevin Esch as his successor [16][17] - The company is excited about the upcoming launches of Linivi and Portela, which are expected to expand the market for OA pain management [11][58] Q&A Session Summary Question: What changed interquarterly after raising guidance last quarter? - Management noted anticipated deceleration in the second half of the year, competitive launch dynamics, and macro impacts on U.S. clinics as key factors [35][36] Question: How is the competitive landscape affecting the dermatology category? - Management acknowledged competitive pressures but emphasized that patient share gains from competitors have been limited [42][64] Question: What are the expectations for livestock growth moving forward? - Management expressed confidence in the sustainability of livestock growth drivers, citing increased demand for protein and urbanization trends [72][71]

Financial Data and Key Metrics Changes - The company reported $2.4 billion in revenue for Q3 2025, growing 1% on a reported basis and 4% on an organic operational basis, primarily driven by price as volume was flat [26][27] - Adjusted net income was $754 million, growing 5% on a reported basis and 9% on an organic operational basis [27][44] - Adjusted diluted EPS grew 7% operationally in the quarter and 12% on an organic operational basis [44] Business Line Data and Key Metrics Changes - The global companion animal portfolio posted revenue of $1.7 billion, growing 2% operationally, with the Simparica franchise contributing $356 million, growing 7% [27][31] - The livestock portfolio grew 10% on an organic operational basis, contributing $725 million in revenue, reflecting strong performance across segments and species [27][28] - The osteoarthritis pain franchise declined 11% operationally, with global Librela sales down 15% [13][27] Market Data and Key Metrics Changes - In the U.S., companion animal revenue was flat, while livestock grew 14% on an organic operational basis [29] - Internationally, revenue grew 3% on a reported basis and 6% on an organic operational basis, with companion animal growing 4% and livestock growing 8% [37][38] - The international Simparica franchise grew 22% operationally, with Simparica Trio growing 32% [39][40] Company Strategy and Development Direction - The company is focused on enhancing its U.S. commercial structure to better serve customers and improve agility, aiming for a leaner field organization [16][17] - Continued investment in manufacturing excellence and innovation is emphasized, with plans for new product launches and geographic expansions [15][20] - The company anticipates a major new market approval each year for the next several years, reinforcing its long-term growth trajectory [15][22] Management's Comments on Operating Environment and Future Outlook - Management noted that therapeutic visits in U.S. clinics have been declining, impacting new patient starts, but alternative channels are showing strong growth [63][64] - The company is optimistic about returning to growth in 2026, particularly in the livestock segment, which has shown resilience [55][96] - Management expressed confidence in the long-term growth potential of the business and the broader animal health market despite near-term challenges [46][96] Other Important Information - The company announced the retirement of Rob Holder, Head of R&D, and the appointment of Kevin Esch as his successor [22][23] - The company is implementing a multi-pronged strategy to return Librela to growth, focusing on education and awareness of osteoarthritis [14][80] Q&A Session Summary Question: What changed intra-quarter after raising guidance last quarter? - Management acknowledged deceleration in the back half of the year due to strong comps and macro impacts, particularly in U.S. clinics [50][51] Question: How is competition affecting the dermatology category? - Management noted that competitive dynamics have intensified, but they remain confident in their product positioning and market share [58][89] Question: What are the growth drivers for livestock moving forward? - Management highlighted sustainable demand for protein and urbanization as key growth drivers for livestock [96][97]