Financial Data and Key Metrics Changes - The company reported $2.2 billion in revenue, growing 1% on a reported basis and 9% on an organic operational basis, driven by 4% price and 5% volume [22][24][36] - Adjusted net income was $662 million, growing 4% on a reported basis and 6% on an organic operational basis [22][36] - Adjusted diluted EPS grew 4% operationally and 8% on an organic operational basis, reflecting a lower share count due to ongoing share buybacks [33][36] Business Line Data and Key Metrics Changes - The companion animal portfolio generated $1.5 billion in revenue, growing 9% operationally, with significant contributions from the Simparica franchise, key dermatology, and OA pain mAbs [22][23][24] - Livestock revenue declined 2% on an organic operational basis, primarily due to aggressive price competition [24][27] - The U.S. segment grew 2% on a reported basis and 6% on an organic operational basis, with companion animal growing 8% and livestock declining [24][27] Market Data and Key Metrics Changes - The international segment's revenue was flat on a reported basis but grew 11% on an organic operational basis, with companion animal growing 10% and livestock growing 12% [27][31] - The international Simparica franchise grew 23% operationally, driven by strong market share gains in Latin America and Eastern Europe [28][31] - The livestock segment's growth was supported by higher prices and volume growth in poultry vaccines across Asia, the Middle East, and Latin America [31] Company Strategy and Development Direction - The company maintains a full-year organic operational revenue guidance range of 6% to 8%, reflecting confidence in its diversified portfolio [19][36] - The focus remains on executing a multi-levered strategy, emphasizing innovation, operational excellence, and strategic capital allocation [10][21] - The company is investing in medical education and direct-to-consumer campaigns to drive awareness and adoption of its products, particularly in the OA pain market [15][17][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the animal health industry despite macroeconomic uncertainties, highlighting the essential nature of their business [9][19] - The company is adapting to challenges while seizing opportunities, maintaining a strong balance sheet and operational excellence [10][21] - Future guidance reflects potential impacts from enacted tariffs, with a focus on navigating the dynamic environment [36][37] Other Important Information - The adjusted gross margin was 72.1%, growing 140 basis points on a reported basis, with foreign exchange having a favorable impact [32] - The company is actively monitoring the FDA and USDA for any potential delays or backlogs in product approvals [83][84] - Retail sales grew 40% in the quarter, with alternative channels continuing to gain traction [86][88] Q&A Session Summary Question: Insights on Librela and Tariffs - Management reported 15% organic operating growth for Librela globally, with strong vet satisfaction and ongoing education efforts [41][42] - The tariff impact embedded in guidance primarily relates to imports from China, with a net headwind of $20 million expected [44][72] Question: Competitive Landscape - The company noted that competition in dermatology and parasiticides remains strong, with a focus on maintaining market share through innovation and first-mover advantages [49][53] - Despite new entrants, the company continues to see growth in its key franchises, with double-digit growth expected [58][60] Question: Consumer Sentiment and Compliance - Management acknowledged a more measured approach to managing chronic conditions among consumers, but remains confident in the durability of the animal health industry [94] - The company expects price and volume mix to remain consistent with previous expectations, with a focus on maintaining growth across its portfolio [96]

Financial Data and Key Metrics Changes - The company reported $2.2 billion in revenue for Q1 2025, growing 1% on a reported basis and 9% on an organic operational basis, driven by 4% price and 5% volume growth [22][19] - Adjusted net income was $662 million, growing 4% on a reported basis and 6% on an organic operational basis [22][19] - Adjusted gross margin increased to 72.1%, growing 140 basis points on a reported basis [33] Business Line Data and Key Metrics Changes - The companion animal portfolio generated $1.5 billion in revenue, growing 9% operationally [22] - The Simparica franchise contributed $367 million, growing 19%, while key dermatology posted $387 million, growing 10% [22] - Livestock revenue declined 2% on an organic operational basis, primarily due to aggressive price competition [28] Market Data and Key Metrics Changes - The U.S. segment grew 2% on a reported basis and 6% on an organic operational basis, with companion animal growing 8% and livestock declining 2% [24] - International revenue was flat on a reported basis but grew 11% on an organic operational basis, with companion animal growing 10% and livestock growing 12% [28] Company Strategy and Development Direction - The company is focused on executing its strategy with discipline, supported by a strong balance sheet and operational excellence [9] - The company aims to maintain its full-year organic operational revenue guidance range of 6% to 8% [19] - The company is investing in medical education and direct-to-consumer campaigns to drive awareness and adoption of its products [16][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the animal health industry despite macroeconomic uncertainties [19] - The company is maintaining its full-year adjusted net income guidance of $2.775 billion to $2.825 billion, reflecting operational growth of 5% to 7% [38] - Management highlighted the importance of innovation and customer engagement in navigating the current environment [20] Other Important Information - The company received conditional licensure from the USDA for an avian influenza vaccine for chickens [17] - The company is actively monitoring the impact of tariffs and has reflected the net impact of current tariffs in its guidance [46][73] Q&A Session Summary Question: What is the response to the Librela label change and the tariff impacts? - Management reported a 15% organic operating growth in Librela globally, with strong vet satisfaction and ongoing education efforts [42][44] - The tariff impact embedded in guidance primarily relates to imports from China and is expected to be around $20 million [46][73] Question: What competitive pressures are being faced in the market? - Management acknowledged competitive entrants but emphasized the company's first-mover advantage and continued growth in key franchises [51][54] Question: How is the company addressing consumer sentiment and compliance? - Management noted a more measured approach to managing chronic conditions but remains confident in the durability of the animal health industry [94] Question: What are the expectations for price and volume for the rest of the year? - The company expects price to be above historical levels but below those of the previous years, with volume growth remaining strong [97]

Financial Performance Highlights - Revenue reached $2.2 billion, reflecting a 9% organic operational increase[12] - Adjusted Net Income was $662 million, a 6% organic operational increase[12] - Adjusted Diluted EPS was $1.48, an 8% organic operational increase[12] Segment Performance - U S segment revenue totaled $1.2 billion, with companion animal revenue at $1.0 billion showing 6% organic operational growth and 8% growth respectively[22] - International segment revenue reached $1.0 billion, with companion animal revenue at $0.6 billion and livestock revenue at $0.4 billion, demonstrating 11% and 12% organic operational growth respectively[23] Franchise Growth - Simparica franchise experienced 19% operational growth[13] - Key Dermatology franchise grew 10% operationally[13] - OA pain franchise increased 15% operationally[13] Updated Financial Guidance for 2025 - Revenue is projected between $9.425 billion and $9.575 billion[26] - Adjusted Net Income is expected to be between $2.775 billion and $2.825 billion[26] - Adjusted Diluted EPS is forecasted to be between $6.20 and $6.30[26]

Financial Performance - Zoetis reported revenue of $2.2 billion for Q1 2025, a 1% increase compared to Q1 2024, with 9% organic operational growth [3]. - Net income for Q1 2025 was $631 million, or $1.41 per diluted share, reflecting increases of 5% and 8% respectively on a reported basis [4]. - Adjusted net income for Q1 2025 was $662 million, or $1.48 per diluted share, marking a 4% increase on a reported basis and 6% on an organic operational basis [4]. - Total revenue for the three months ended March 31, 2025, was $2,220 million, a 1% increase compared to $2,190 million in 2024 [36]. - The company reported total earnings of $810 million, an 8% increase from $747 million in the prior year [42]. Segment Performance - The U.S. segment revenue was $1.2 billion, up 2% year-over-year, with companion animal product sales increasing by 8% [6]. - The International segment revenue was $1.0 billion, flat on a reported basis but up 11% on an organic operational basis [6]. - Companion Animal revenue increased by 7% to $1,546 million, while Livestock revenue decreased by 10% to $645 million [36]. - U.S. total revenue rose by 2% to $1,183 million, with Companion Animal revenue up 8% and Livestock revenue down 21% [36]. - International earnings increased by 3% to $551 million, with a gross margin of 70.0% [42]. Guidance and Projections - Zoetis updated its full year 2025 revenue guidance to between $9.425 billion and $9.575 billion, maintaining organic operational growth guidance of 6% to 8% [4]. - Adjusted diluted EPS guidance for 2025 is updated to between $6.20 and $6.30, reflecting the impact of foreign exchange and enacted tariffs [4]. - Adjusted net income guidance for 2025 is updated to between $2.775 billion and $2.825 billion, reflecting organic operational growth of 5% to 7% [10]. - The company expects full-year 2025 revenue guidance of $9,425 to $9,575 million, an increase from the prior guidance of $9,225 to $9,375 million [31]. - Adjusted net income for 2025 is projected to be between $2,775 to $2,825 million, up from the previous estimate of $2,700 to $2,750 million [31]. Cost and Expenses - Adjusted cost of sales decreased by 3% to $620 million in Q1 2025, compared to $642 million in Q1 2024, with adjusted cost of sales as a percentage of revenue at 27.9% [28]. - The cost of sales in the U.S. decreased by 8% to $199 million, contributing to improved gross profit [42]. - Adjusted SG&A expenses for 2025 are projected to be between $2,340 to $2,390 million, an increase from the previous range of $2,300 to $2,350 million [31]. - Research and development expenses for 2025 are expected to be between $690 to $700 million, up from the prior estimate of $680 to $690 million [31]. Product Development and Approvals - The company received new product approvals, including Simparica Trio for flea tapeworm prevention in the U.S. and additional claims for Revolution Plus in the U.K. [7]. - Livestock product sales declined 21% in Q1 2025, primarily due to the divestiture of the medicated feed additive product portfolio [6]. - The company experienced a 45% increase in revenue from the Human Health segment, rising to $29 million [36]. Tax and Significant Items - The effective tax rate on adjusted income is anticipated to be approximately 21% for 2025, unchanged from previous guidance [31]. - Certain significant items and acquisition-related costs for 2025 are estimated at approximately $45 million, up from the previous estimate of $30 million [31].

Group 1 - The article initiates coverage on Zoetis (ZTS) with a Strong Buy rating and a price target of $219.26, highlighting its position as a global leader in animal health therapeutics, diagnostics, and vaccines for both companion and livestock species [1] - The Strong Buy case is supported by Moretus Research's structured approach to equity research, focusing on identifying companies with durable business models and mispriced cash flow potential [1] - Moretus Research emphasizes a disciplined analysis that combines fundamental research with a judgment-driven process, aiming to provide actionable insights and a strong filter for relevant information in equity analysis [1] Group 2 - The research methodology prioritizes underappreciated companies that are undergoing structural changes or temporary dislocations, which can lead to asymmetric returns through dispassionate analysis [1] - Valuation techniques are based on sector-relevant multiples tailored to each company's business model and capital structure, emphasizing comparability and simplicity [1] - Moretus Research aims to elevate the standard for independent investment research by delivering professional-grade insights and actionable valuations [1]

Core Insights - Wall Street analysts expect Zoetis (ZTS) to report quarterly earnings of $1.40 per share, reflecting a year-over-year increase of 1.5% [1] - Revenues are anticipated to be $2.19 billion, unchanged from the same quarter last year [1] - The consensus EPS estimate has been revised 0.2% lower over the last 30 days, indicating a reevaluation of initial estimates by analysts [1] Revenue Estimates - 'Revenues- Contract Manufacturing & Human Health' are projected to reach $19.16 million, a decrease of 4.2% from the prior-year quarter [4] - 'Revenues- Companion Animal' are expected to be $1.54 billion, showing an increase of 6.3% year over year [4] - 'Revenues- Livestock' are estimated at $631.41 million, indicating a decline of 12.3% compared to the previous year [4] Livestock Revenue Breakdown - 'Revenues- Livestock - Cattle' are forecasted at $324.74 million, reflecting a decrease of 17% from the prior-year quarter [5] - 'Revenues- Livestock - Swine' are expected to reach $128.40 million, suggesting a slight increase of 1.1% year over year [5] - 'Revenues- Livestock - Poultry' are projected to be $142.19 million, indicating a year-over-year increase of 2.3% [5] Geographic Revenue Estimates - 'Geographic Revenues- U.S.' are estimated at $1.19 billion, reflecting a year-over-year increase of 2% [6] - 'Geographic Revenues- International Revenue' are expected to be $987.35 million, indicating a decrease of 2% year over year [6] - 'Geographic Revenues- International - Livestock' are projected at $402.51 million, reflecting a decline of 11.5% from the prior-year quarter [6] Companion Animal Revenue Insights - 'Geographic Revenues- International - Companion Animal' are expected to reach $587.13 million, indicating a year-over-year increase of 6.4% [7] - 'Geographic Revenues- U.S.- Livestock' are projected at $225.66 million, suggesting a decrease of 14.8% year over year [7] - 'Geographic Revenues- U.S.- Companion Animal' are estimated at $955.61 million, reflecting a year-over-year increase of 6.4% [8] Stock Performance - Shares of Zoetis have decreased by 4.3% in the past month, compared to a 0.7% decline in the Zacks S&P 500 composite [8] - With a Zacks Rank 3 (Hold), Zoetis is expected to mirror the overall market performance in the near future [8]

Core Viewpoint - The market anticipates Zoetis (ZTS) will report a year-over-year increase in earnings driven by higher revenues in its upcoming earnings report for the quarter ended March 2025, with a consensus EPS estimate of $1.40, reflecting a 1.5% increase from the previous year [1][3]. Earnings Expectations - The expected revenue for Zoetis is $2.19 billion, indicating no change from the year-ago quarter [3]. - The stock may experience upward movement if the actual earnings exceed expectations, while a miss could lead to a decline [2]. Estimate Revisions - The consensus EPS estimate has been revised down by 0.23% over the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [4]. - The Most Accurate Estimate for Zoetis is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.15% [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with a strong predictive power for positive readings [7][8]. - Zoetis currently holds a Zacks Rank of 3, making it challenging to predict a beat on the consensus EPS estimate [11]. Historical Performance - In the last reported quarter, Zoetis had an earnings surprise of +2.19%, reporting $1.40 per share against an expectation of $1.37 [12]. - Over the past four quarters, Zoetis has consistently beaten consensus EPS estimates [13]. Industry Comparison - Neurocrine Biosciences (NBIX), another player in the Zacks Medical - Drugs industry, is expected to report earnings of $0.42 per share, with revenues projected at $569.46 million, reflecting a 10.5% increase from the previous year [17]. - Neurocrine's consensus EPS estimate has been revised down by 5.2% over the last 30 days, resulting in an Earnings ESP of -37.31% [18].

Core Viewpoint - Zoetis, Inc. is expected to report its first-quarter 2025 earnings on May 6, 2025, with revenue estimates at $2.19 billion and earnings at $1.40 per share [1]. Group 1: Revenue Sources - The company generates most of its revenues from a diversified portfolio of veterinary medicines and vaccines for livestock and companion animals, with additional revenues from non-pharmaceutical categories like nutritional products and precision animal health services [2]. - In the United States segment, revenues are projected to increase to $1.19 billion, driven by rising sales of companion animal products, with model estimates at $1.17 billion [3]. - The International segment is also expected to see revenue growth, estimated at $0.99 billion, with model estimates at $1.01 billion, primarily due to higher sales of companion animal products [4]. Group 2: Product Performance - Sales of companion animal products, particularly monoclonal antibodies for osteoarthritis pain (Librela for dogs and Solensia for cats), and the flea, tick, and heartworm combination product Simparica Trio, are anticipated to drive revenue growth in both segments [5]. - The FDA recently approved a new indication for Simparica Trio, enhancing its market position as the only canine combination parasiticide indicated to prevent flea tapeworm infections, which is expected to boost future sales [7]. - Livestock product sales in the U.S. are expected to decline due to the divestiture of certain product lines, while international livestock sales are projected to rise, driven by price increases in cattle and poultry portfolios [8]. Group 3: Earnings Surprise History - Zoetis has a strong earnings surprise history, surpassing estimates in the last four quarters with an average surprise of 4.53%, including a 2.19% surprise in the last reported quarter [10]. - The current Earnings ESP for Zoetis is -1.15%, indicating that the most accurate estimate of $1.38 per share is lower than the consensus estimate of $1.40 per share [12].

Company Overview - Zoetis is a leading animal healthcare company that was spun off from Pfizer Animal Health in 2012, with annual sales of $9.3 billion [3] - The company develops and sells medicines, vaccines, diagnostics, genetic tests, and devices for treating livestock and pets [3] Industry Growth - The animal health market is projected to grow from $48 billion in 2023 to between $75 billion and $85 billion by 2033 [5] - Demand for animal protein is increasing due to global population growth, and younger generations are spending more on companion animals compared to older generations [4] Financial Performance - Zoetis has roughly doubled its annual sales over the past decade [5] - The company has consistently raised its dividend since paying its first one in 2013, with a current yield of just over 1.3% and an average annual growth rate of 21.4% over the past five years [6][7] Valuation Insights - The stock has historically traded at a high valuation, averaging a price-to-earnings (P/E) ratio of over 41 for the past decade [9] - Currently, Zoetis is at its lowest valuation on record at 27 times earnings, but it still has a PEG ratio of 2.7, indicating it may not be a bargain [12] Investment Considerations - The company is seen as a potential buy due to its strong market position and growth prospects, but investors are advised to consider gradual purchases in case of further market declines [12] - Zoetis's leadership in the expanding animal health field provides a durable growth runway for investors [8]

Company Performance - Zoetis (ZTS) closed at $152.30, reflecting a +0.92% change from the previous day, which is lower than the S&P 500's gain of 2.03% [1] - Over the past month, Zoetis shares have decreased by 7.31%, which is less than the Medical sector's decline of 8.57% and the S&P 500's drop of 5.07% [1] Upcoming Earnings - The earnings report for Zoetis is scheduled for May 6, 2025, with an expected EPS of $1.40, indicating a growth of 1.45% compared to the same quarter last year [2] - The Zacks Consensus Estimate for revenue is projected at $2.19 billion, reflecting a slight increase of 0.02% from the previous year [2] Full Year Projections - For the full year, the Zacks Consensus Estimates predict earnings of $6.07 per share and revenue of $9.31 billion, representing increases of +2.53% and +0.55% respectively from the prior year [3] - Recent changes in analyst estimates indicate a positive outlook for Zoetis, suggesting optimism regarding the company's business and profitability [3] Valuation Metrics - Zoetis has a Forward P/E ratio of 24.85, which is a premium compared to its industry's Forward P/E of 15.31 [5] - The company has a PEG ratio of 2.64, while the Medical - Drugs industry has an average PEG ratio of 1.16 [6] Industry Ranking - The Medical - Drugs industry, which includes Zoetis, ranks in the top 24% of all industries, with a current Zacks Industry Rank of 59 [6] - The Zacks Industry Rank assesses the strength of industry groups based on the average Zacks Rank of individual stocks, indicating that top-rated industries outperform lower-rated ones by a factor of 2 to 1 [7]