Group 1 - Zoetis Inc. reported Q4 earnings that met consensus expectations, but the stock experienced a sharp sell-off in the morning session before recovering in the afternoon [1] - The primary concern affecting the stock was the slowing growth in revenue [1] Group 2 - The company has a history of significant investment and innovation in the biotechnology sector, with key personnel having extensive experience in pharmaceuticals and biotech startups [1]

Part I [Business Overview](index=3&type=section&id=Item%201.%20Business) Zoetis is a global leader in the animal health industry, providing a diverse portfolio of products and services for companion animals and livestock [Overview and Operating Segments](index=3&type=section&id=Overview%20and%20Operating%20Segments) Zoetis is a global leader in animal health, focusing on medicines, vaccines, and diagnostics for eight core species, operating in U.S. and International segments - Zoetis is a global leader in the animal health industry, commercializing products across eight core species and seven major product categories[8](index=8&type=chunk) 2024 Revenue by Operating Segment | Operating Segment | Revenue (in millions) | Percentage of Total Revenue | | :--- | :--- | :--- | | United States (U.S.) | $5,074 | 55% | | International | $4,102 | 44% | 2024 Revenue Breakdown for Key Markets | Market | Revenue (in millions) | Companion Animal % | Livestock % | | :--- | :--- | :--- | :--- | | United States | $5,074 | 80% | 20% | | Total International | $4,102 | 54% | 46% | | Australia | $319 | 53% | 47% | | Brazil | $414 | 41% | 59% | | Canada | $277 | 62% | 38% | | China | $270 | 69% | 31% | | United Kingdom | $314 | 78% | 22% | [Products](index=5&type=section&id=Products) Zoetis's product portfolio is primarily composed of companion animal products (68% of revenue) and livestock products (31%), with top five lines contributing 41% of total revenue - Companion animal products represented approximately **68% of revenue**, while livestock products represented approximately **31%** for the year ended December 31, 2024[16](index=16&type=chunk)[17](index=17&type=chunk) - The top two product lines, Simparica/Simparica Trio and Apoquel/Apoquel Chewable, contributed approximately **15%** and **11% of revenue**, respectively. The top five product lines contributed approximately **41% of revenue** in 2024[27](index=27&type=chunk) - In 2024, the company divested its medicated feed additive product portfolio[19](index=19&type=chunk) - Key product categories include parasiticides, vaccines, dermatology, anti-infectives, pain and sedation, other pharmaceuticals, and animal health diagnostics[21](index=21&type=chunk) [Operations and Strategy](index=8&type=section&id=Operations%20and%20Strategy) Zoetis operates globally in over 100 countries with 44% of 2024 revenue from international operations, supported by 4,050 sales specialists and a network of 22 manufacturing sites and over 110 CMOs - International operations accounted for **44% of total revenue** for the year ended December 31, 2024, with products sold in over 100 countries[30](index=30&type=chunk) - The sales organization consists of approximately **4,050 employees** as of December 31, 2024, who visit customers directly[33](index=33&type=chunk) - Sales to the company's largest customer, a U.S. veterinary distributor, represented approximately **14% of total revenue** for 2024[36](index=36&type=chunk) - The global manufacturing network consists of **22 company-operated sites** and over **110 third-party contract manufacturing organizations (CMOs)**[42](index=42&type=chunk)[45](index=45&type=chunk) [Research and Development](index=9&type=section&id=Research%20and%20Development) Zoetis invested $686 million in R&D in 2024, employing 1,600 people to manage over 300 programs focused on new product development and lifecycle innovation R&D Expenses (2022-2024) | Year | R&D Expense (in millions) | | :--- | :--- | | 2024 | $686 | | 2023 | $614 | | 2022 | $539 | - As of December 31, 2024, Zoetis employed approximately **1,600 people** in its global R&D operations[41](index=41&type=chunk) - R&D efforts comprise more than **300 programs**, focusing on both new product development and product lifecycle innovation[38](index=38&type=chunk) [Competition and Intellectual Property](index=10&type=section&id=Competition%20and%20Intellectual%20Property) Zoetis, the largest animal health company, faces intense competition from major players and generics, protecting its portfolio with approximately 5,500 granted patents despite key product patent expirations - Primary competitors include Boehringer Ingelheim Animal Health, Merck Animal Health, Elanco Animal Health, and IDEXX Laboratories[50](index=50&type=chunk) - The company holds approximately **5,500 granted patents** and has **1,450 pending patent applications** across more than 50 countries[54](index=54&type=chunk) - Patents for the active ingredient in Draxxin (tulathromycin) have expired in most major markets, leading to generic competition and a negative impact on sales[56](index=56&type=chunk) - Patents for the active ingredient of Excede/Naxcel (ceftiofur) have expired, with formulation patents expiring in the U.S. in July 2024[56](index=56&type=chunk) - The active ingredient patent for Cerenia has expired globally, and generic injectable versions are marketed in Europe, Canada, and Australia, with U.S. approval being pursued by competitors[56](index=56&type=chunk) [Regulatory Environment](index=11&type=section&id=Regulatory%20Environment) Zoetis's products are extensively regulated by agencies like the FDA, USDA, and EPA in the U.S., and EMA, MARA, and MAPA internationally, also adhering to global data privacy laws like GDPR - In the U.S., animal health products are regulated by the FDA (pharmaceuticals), USDA (biologicals), and EPA (pesticides)[60](index=60&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) - Key international regulatory bodies include the EMA in the EU, VMD in the U.K., MARA in China, MAPA in Brazil, and APVMA in Australia[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - The company is subject to global data privacy laws, such as the EU's GDPR, which require enhanced handling of personal data[70](index=70&type=chunk)[78](index=78&type=chunk) [Human Capital and Environmental](index=13&type=section&id=Human%20Capital%20and%20Environmental) Zoetis employed approximately 13,800 people worldwide in 2024, achieving 86% employee engagement and incurring $28 million in environmental-related expenditures - As of December 31, 2024, the company had approximately **13,800 employees worldwide** (~6,700 in the U.S. and ~7,100 internationally)[81](index=81&type=chunk) - The employee engagement rate was **86% in 2024**, and the global voluntary attrition rate was stable at **8%**[84](index=84&type=chunk)[87](index=87&type=chunk) 2024 Environmental Expenditures | Category | Expenditure (in millions) | | :--- | :--- | | Environmental-related capital expenditures | ~$5 | | Other environmental-related expenditures | ~$23 | [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including intense competition, product dependence, manufacturing issues, extensive regulation, substantial indebtedness, and cybersecurity threats - The animal health industry is highly competitive, with pressure from large pharmaceutical companies, standalone businesses, and lower-priced generic alternatives[117](index=117&type=chunk) - The company's results are dependent on its top-selling products. The top five product lines contributed approximately **41% of revenue** in 2024, making them a significant concentration risk[118](index=118&type=chunk) - Manufacturing problems, such as supply chain disruptions or quality control failures at one of the **22 manufacturing sites** or over **110 CMOs**, could cause inventory shortages and recalls[153](index=153&type=chunk) - The business is subject to substantial regulation from agencies like the FDA, USDA, and EPA, and failure to comply can result in fines, production shutdowns, and product withdrawals[164](index=164&type=chunk) - As of December 31, 2024, the company had approximately **$6.7 billion of total unsecured indebtedness**, which could make it difficult to satisfy obligations and limit operational flexibility[204](index=204&type=chunk) - Cyberattacks pose a significant risk due to the company's reliance on complex IT systems, with potential for data breaches, disclosure of confidential information, and operational disruptions[182](index=182&type=chunk) [Cybersecurity](index=29&type=section&id=Item%201C.%20Cybersecurity) Zoetis implements a 'Defense in Depth' cybersecurity program aligned with NIST, overseen by the Board, with regular assessments and a 24/7 SOC - The company's cybersecurity program is aligned to the NIST Cybersecurity Framework (CSF) and uses a "Defense in Depth" security approach[217](index=217&type=chunk) - An independent third party conducts comprehensive assessments of the cybersecurity program approximately every **18 months**[217](index=217&type=chunk) - The Board of Directors, through the Audit Committee, oversees the company's enterprise risk management and information security program. The CISO presents updates at least annually to the full Board[223](index=223&type=chunk)[225](index=225&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) Zoetis operates approximately 184 owned and leased properties globally, totaling 11.4 million square feet, with the largest site in Kalamazoo, Michigan, supporting R&D and manufacturing - The company has approximately **184 properties** totaling **11.4 million square feet** worldwide[226](index=226&type=chunk) - The largest facility is an owned site in Kalamazoo, Michigan, which comprises approximately **1.6 million square feet** for R&D and manufacturing[226](index=226&type=chunk) [Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) Zoetis is involved in various legal proceedings, including product liability and intellectual property claims, which management believes are unlikely to have a material adverse effect - The company is subject to claims and litigation in the ordinary course of business, including product liability, competition law, and patent litigation[228](index=228&type=chunk) - Management believes the likelihood of a material adverse effect from current legal proceedings is remote, but acknowledges that litigation is inherently unpredictable[229](index=229&type=chunk) Part II [Market for Common Equity and Shareholder Matters](index=31&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Zoetis common stock is listed on the NYSE, with a new $6 billion share repurchase authorization approved in August 2024, and dividends declared at the Board's discretion - In August 2024, the Board of Directors authorized a new multi-year share repurchase program of up to **$6 billion**. As of December 31, 2024, **$5.6 billion** remained under this authorization[236](index=236&type=chunk) Issuer Purchases of Equity Securities (Q4 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Oct 1 - Oct 31, 2024 | 406,138 | $187.74 | | Nov 1 - Nov 30, 2024 | 1,235,190 | $175.49 | | Dec 1 - Dec 31, 2024 | 1,475,700 | $175.85 | | **Total** | **3,117,028** | **$177.26** | - The declaration and payment of dividends are at the discretion of the Board of Directors and depend on financial condition, operating results, and other factors[239](index=239&type=chunk) [Management's Discussion and Analysis (MD&A)](index=33&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2024, Zoetis reported $9.26 billion in revenue, an 8% increase, with net income rising 6% to $2.49 billion, driven by strong U.S. segment growth and improved cost of sales [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Zoetis achieved $9.26 billion in revenue in 2024, an 8% increase, with net income of $2.49 billion, driven by companion animal products and improved cost of sales Financial Performance Summary (2022-2024) | (MILLIONS OF DOLLARS) | 2024 | 2023 | 2022 | % Change 24/23 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $9,256 | $8,544 | $8,080 | 8% | | Net income attributable to Zoetis | $2,486 | $2,344 | $2,114 | 6% | | Adjusted net income (a) | $2,693 | $2,457 | $2,297 | 10% | - Operational revenue growth of **11% in 2024** was primarily driven by price growth of approximately **6%**, volume growth from new products of **3%**, and volume growth from key dermatology products of **2%**[314](index=314&type=chunk) - Cost of sales as a percentage of revenue decreased from **30.0% in 2023 to 29.4% in 2024**, mainly due to price increases, favorable product mix, and lower freight costs[316](index=316&type=chunk) - R&D expenses increased by **12% to $686 million in 2024**, driven by higher project investments and compensation-related costs[321](index=321&type=chunk) [Operating Segment Results](index=42&type=section&id=Operating%20Segment%20Results) In 2024, the U.S. segment revenue grew 11% to $5.07 billion, while the International segment revenue increased 5% (10% operationally) to $4.10 billion, both driven by companion animal products - **U.S. Segment:** Revenue grew **11% to $5,074 million**. Companion animal revenue increased **15%**, driven by Simparica Trio, OA pain products (Librela, Solensia), and dermatology products. Livestock revenue declined **1%**. Segment earnings increased **17% to $3,336 million**[335](index=335&type=chunk)[336](index=336&type=chunk)[341](index=341&type=chunk) - **International Segment:** Revenue grew **5% (10% operationally) to $4,102 million**. Companion animal operational revenue grew **13%**, while livestock operational revenue grew **8%**. Foreign exchange had a negative impact of **5% ($210 million)**. Segment earnings increased **4% (11% operationally) to $2,118 million**[337](index=337&type=chunk)[338](index=338&type=chunk)[341](index=341&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) Management uses non-GAAP measures like 'operational growth' and 'adjusted net income' to assess core performance, with adjusted net income increasing 10% to $2.69 billion in 2024 Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income | (MILLIONS OF DOLLARS) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | GAAP reported net income attributable to Zoetis | $2,486 | $2,344 | 6% | | Purchase accounting adjustments—net of tax | 109 | 127 | (14%) | | Acquisition and divestiture-related costs—net of tax | 14 | 7 | * | | Certain significant items—net of tax | 84 | (21) | * | | **Non-GAAP adjusted net income** | **$2,693** | **$2,457** | **10%** | Reconciliation of GAAP Diluted EPS to Non-GAAP Adjusted Diluted EPS | | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | GAAP reported EPS attributable to Zoetis—diluted | $5.47 | $5.07 | 8% | | Purchase accounting adjustments—net of tax | 0.24 | 0.28 | (14%) | | Acquisition and divestiture-related costs—net of tax | 0.03 | 0.02 | 50% | | Certain significant items—net of tax | 0.18 | (0.05) | * | | **Non-GAAP adjusted EPS—diluted** | **$5.92** | **$5.32** | **11%** | [Liquidity and Capital Resources](index=47&type=section&id=Analysis%20of%20financial%20condition%2C%20liquidity%20and%20capital%20resources) Zoetis maintained strong liquidity in 2024 with $1.99 billion in cash, generating $2.95 billion from operations, and managing $6.57 billion in debt, supported by a $1.0 billion undrawn credit facility Selected Liquidity Measures (as of Dec 31) | (MILLIONS OF DOLLARS) | 2024 | 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,987 | $2,041 | | Working capital | $2,574 | $4,454 | | Long-term debt (including current portion) | $6,570 | $6,564 | - Net cash provided by operating activities increased to **$2,953 million in 2024** from **$2,353 million in 2023**, primarily due to higher net income and favorable changes in working capital[377](index=377&type=chunk) - The company has a **$1.0 billion senior unsecured revolving credit facility** expiring in December 2027, which was undrawn as of December 31, 2024[382](index=382&type=chunk)[551](index=551&type=chunk) - During 2024, **10.4 million shares** were repurchased for **$1.8 billion**[397](index=397&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Zoetis is exposed to foreign exchange and interest rate risks, hedging with derivatives, with a 10% USD change impacting CTA by $91 million and a 100-basis point SOFR increase raising interest expense by $3 million - The company's primary net foreign currency exposures are the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese renminbi, and euro[405](index=405&type=chunk) - A hypothetical **10% change** in the U.S. dollar against all other currencies would change the amount recorded in cumulative translation adjustment (CTA) related to net investment hedges by approximately **$91 million**[407](index=407&type=chunk) - The company's outstanding debt is predominantly fixed-rate. However, interest rate swaps effectively convert a portion of this debt to a variable rate based on SOFR. A **100-basis point increase** in SOFR would increase annual interest expense by approximately **$3 million**[410](index=410&type=chunk)[411](index=411&type=chunk) [Financial Statements and Supplementary Data](index=54&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Zoetis's audited consolidated financial statements for 2024, including the auditor's unqualified opinion and critical audit matters regarding tax benefits and rebate accruals [Report of Independent Registered Public Accounting Firm](index=55&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on Zoetis's 2024 financial statements and internal controls, highlighting critical audit matters for unrecognized tax benefits and U.S. segment rebate accruals - KPMG LLP issued an unqualified opinion, stating the financial statements are presented fairly in all material respects[419](index=419&type=chunk) - A critical audit matter was the evaluation of gross unrecognized tax benefits of **$213 million**, which required complex judgment and specialized tax skills to assess[424](index=424&type=chunk)[425](index=425&type=chunk) - A second critical audit matter was assessing the U.S. segment's rebate accrual, due to the variety of programs and challenging auditor judgment required to estimate the accrual[427](index=427&type=chunk)[428](index=428&type=chunk) [Consolidated Financial Statements](index=58&type=section&id=Consolidated%20Financial%20Statements) The 2024 consolidated financial statements show $9.256 billion in revenue, $2.486 billion in net income, $14.237 billion in total assets, and $2.953 billion in cash from operations Consolidated Statement of Income (Year Ended Dec 31, 2024) | (MILLIONS OF DOLLARS) | Amount | | :--- | :--- | | Revenue | $9,256 | | Income before provision for taxes on income | $3,133 | | Net income attributable to Zoetis Inc. | $2,486 | | Diluted Earnings per share | $5.47 | Consolidated Balance Sheet (As of Dec 31, 2024) | (MILLIONS OF DOLLARS) | Amount | | :--- | :--- | | Total current assets | $5,986 | | Total assets | $14,237 | | Total current liabilities | $3,412 | | Total liabilities | $9,467 | | Total Zoetis Inc. equity | $4,770 | Consolidated Statement of Cash Flows (Year Ended Dec 31, 2024) | (MILLIONS OF DOLLARS) | Amount | | :--- | :--- | | Net cash provided by operating activities | $2,953 | | Net cash used in investing activities | ($315) | | Net cash used in financing activities | ($2,660) | | Net decrease in cash and cash equivalents | ($54) | [Selected Notes to Consolidated Financial Statements](index=63&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail revenue disaggregation, the 2024 divestiture of medicated feed additive portfolio for $292 million, a contested IRS audit for $450 million, and $6.65 billion in outstanding long-term debt - On October 31, 2024, the company completed the divestiture of its medicated feed additive product portfolio to Phibro Animal Health for net proceeds of **$292 million**, resulting in a pre-tax loss of **$25 million**[525](index=525&type=chunk) - The IRS is auditing tax years 2017-2018 and has proposed adjustments related to the one-time mandatory deemed repatriation tax. The proposed additional tax liability is approximately **$450 million**, which Zoetis disagrees with and is protesting[547](index=547&type=chunk)[548](index=548&type=chunk) - As of December 31, 2024, the company had **$6.65 billion** in principal amount of senior notes outstanding, with maturities ranging from 2025 to 2050[558](index=558&type=chunk)[560](index=560&type=chunk) - Sales to the largest customer, a U.S. veterinary distributor, accounted for approximately **14% of total revenue** in 2024[521](index=521&type=chunk) [Controls and Procedures](index=93&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that Zoetis's disclosure controls and internal control over financial reporting were effective as of December 31, 2024, a conclusion affirmed by KPMG LLP - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[650](index=650&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024, a conclusion audited and affirmed by KPMG LLP[651](index=651&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, and Other Matters](index=94&type=section&id=Items%2010-14) This section incorporates by reference information from the company's 2025 Proxy Statement regarding directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees - Information regarding directors, executive officers, corporate governance (Item 10), executive compensation (Item 11), security ownership (Item 12), certain relationships and director independence (Item 13), and principal accountant fees (Item 14) is incorporated by reference from the registrant's 2025 Proxy Statement[4](index=4&type=chunk)[657](index=657&type=chunk)[658](index=658&type=chunk)[659](index=659&type=chunk)[660](index=660&type=chunk)[662](index=662&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=95&type=section&id=Item%2015.%20Exhibit%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including key corporate documents and debt agreements, many incorporated by reference - This section provides a comprehensive index of all exhibits filed with or incorporated by reference into the Form 10-K, including the Restated Certificate of Incorporation, Amended and Restated By-laws, various debt indentures, and management compensation plans[667](index=667&type=chunk)[669](index=669&type=chunk)[670](index=670&type=chunk)

Core Viewpoint - Zoetis, Inc. reported strong fourth-quarter 2024 results with adjusted earnings of $1.40 per share, exceeding estimates, and total revenues of $2.32 billion, also surpassing expectations [1][2]. Financial Performance - Adjusted earnings for Q4 2024 were $1.40 per share, up from $1.24 in the same quarter last year [1]. - Total revenues increased by 5% year over year to $2.32 billion, compared to $2.21 billion in the prior year [2]. - For the full year 2024, adjusted earnings were $5.92 per share, up from $5.32, with total revenues growing 8% to $9.26 billion [10]. Segment Performance - U.S. segment revenues rose 4% year over year to $1.257 billion, but fell short of estimates [4]. - Companion animal product sales in the U.S. increased by 7% to $1.01 billion, driven by key products like Librela and Solensia [5]. - Livestock product sales in the U.S. decreased by 8% to $249 million, primarily due to divestitures [6]. - International segment revenues grew by 6% year over year to $1.039 billion, exceeding estimates [7]. - Companion animal product sales internationally rose by 11% to $562 million, supported by growth in several key products [8]. - Livestock product sales internationally were flat year over year but grew 6% operationally to $477 million [9]. Future Guidance - For 2025, Zoetis expects adjusted earnings in the range of $6.00 to $6.10 per share, with projected revenues between $9.225 billion and $9.375 billion, indicating operational growth of 2-4% [11][12].

Financial Data and Key Metrics Changes - The company reported full-year revenue of $9.3 billion, growing 8% on a reported basis and 11% operationally, with 6% driven by price and 5% from volume [30] - Adjusted net income grew 10% on a reported basis and 15% operationally to $2.7 billion [31] - Full-year adjusted gross margins were 70.7%, growing 50 basis points on a reported basis [57] Business Line Data and Key Metrics Changes - The companion animal portfolio grew 14% operationally, while the livestock portfolio saw a 5% operational revenue growth [11][21] - The Simparica franchise generated $1.4 billion in revenue, growing 28% operationally, with Simparica Trio exceeding $1 billion in global revenue [31] - The osteoarthritis pain franchises, including Librela and Solensia, reported combined revenue of $581 million, growing 80% operationally [31] Market Data and Key Metrics Changes - In the US, revenue grew 11%, while international revenue grew 10% operationally [10][35] - The international livestock portfolio grew 8% operationally to $1.9 billion in sales for the year [44] - The US livestock business declined 1% due to the MFA divestiture, but organic operational growth was 6% [40] Company Strategy and Development Direction - The company aims for continued above-market growth in the mid to high single-digit range for 2025 and beyond, driven by scientific innovation and commercial excellence [11][25] - A strategic divestiture of the medicated feed additive product portfolio was made to enhance operational focus and prioritize high-growth areas [22] - The company is committed to balancing strategic investments in innovation while delivering long-term value for shareholders [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth due to the diversity of the business model and strong underlying demand in the animal health industry [12][24] - The company anticipates organic operational revenue growth of 6% to 8% in 2025, with continued strong performance from the companion animal business [23][63] - Management highlighted the importance of the human-animal bond and the aging pet population as key drivers for future growth [109] Other Important Information - The company repurchased $1.9 billion of shares in 2024, the most in its history, and increased its dividend rate by 15% [60][61] - The guidance for 2025 reflects foreign exchange headwinds of approximately $250 million to revenue and $50 million to adjusted net income [62] Q&A Session Summary Question: Insights on competition and guidance adjustments - Management acknowledged competition in the dermatology segment and emphasized the vast opportunity remaining in the market, with significant untreated populations [80][81] - Investments in key brands and education for veterinarians were highlighted as strategies to maintain growth despite competition [82] Question: Updates on Librela and its market response - The launch of Librela was described as highly successful, with veterinarians responding positively to updated prescribing information [88][89] - Management confirmed that no new products are included in the 2025 guidance, but strong growth is expected in the OA pain category [87] Question: Revenue cadence and R&D investments - Management indicated a stronger first half of 2025 compared to the second half, factoring in potential competition [98] - R&D investments are expected to align with pipeline progress rather than being a fixed leverageable line item [101] Question: Trends in pet population growth post-COVID - Management noted that the pet population is expected to remain stable, with strong growth drivers from the human-animal bond and an aging pet population [109][110] Question: Upside risks to guidance and total addressable market for new products - Management confirmed that new product approvals are not factored into guidance, but expressed excitement about the diverse portfolio and strong demand [115][118]

Core Viewpoint - Zoetis' shares declined by 6.5% following its fourth-quarter results and 2025 guidance, which fell short of investor expectations despite solid performance in Q4 [1][4]. Financial Performance - Q4 revenue increased by 5% to $2.32 billion, surpassing the consensus estimate of $2.3 billion, with organic operational growth at 9% [2][3]. - U.S. revenue grew by 4%, while international revenue rose by 6%, with the pet segment showing strength, although livestock product sales decreased by 3% to $726 million [3]. - Gross margin improved to 69.5% from 67.1%, indicating better cost control, and adjusted earnings per share (EPS) increased by 13% to $1.40, exceeding estimates of $1.34 [3]. Future Guidance - The company projected organic operational revenue growth of 6% to 8% for 2025, translating to $9.225 billion to $9.375 billion, which is below the consensus estimate of $9.57 billion [4]. - Adjusted EPS guidance for 2025 is set at $6 to $6.10, a slight increase from $5.92 in 2024, but below the expected $6.30 [5].

Core Insights - Zoetis exceeded market expectations in Q4 2024, reporting an adjusted EPS of $1.40, surpassing the consensus estimate of $1.36, reflecting a 12.9% increase year-over-year [2][4] - The company's revenue reached $2.3 billion, slightly above the estimated $2.299 billion, marking a 5% year-over-year growth [2][4] - The strong performance was driven by the companion animal segment, which saw an 8% revenue increase, while the livestock segment faced a 3% decline [7] Financial Performance - Adjusted EPS for Q4 2024 was $1.40, compared to $1.24 in Q4 2023, indicating a 12.9% increase [4] - Revenue for Q4 2024 was $2.317 billion, up from $2.213 billion in Q4 2023, reflecting a 5.0% year-over-year growth [4] - Net income for the quarter was $581 million, up 10.7% from $525 million in Q4 2023 [4] - U.S. revenue reached $1.3 billion, a 4.0% increase from $1.2 billion in Q4 2023 [4] Business Overview - Zoetis is a global leader in animal health, providing products and services for both companion animals and livestock, operating in over 100 countries [5] - The company focuses on diversifying its product offerings and emphasizes research and development to drive innovation [6] Segment Performance - The companion animal segment showed significant growth, driven by products like Simparica Trio, Apoquel, Librela, and Solensia [7] - The livestock segment experienced a revenue decline of 3%, partly due to strategic divestitures [7] - International markets contributed to a 10% operational growth, with Europe and Asia being key regions [8] Research and Development - Zoetis invested $684 million in R&D for the year, focusing on innovative solutions in pain management [9] - The company faced regulatory challenges in markets like China and Brazil, which are crucial for its global strategy [9] Strategic Outlook - For 2025, Zoetis projects revenue growth between $9.225 billion and $9.375 billion, with organic growth anticipated at 6% to 8% [11] - The forecasted EPS is between $5.70 and $5.80, with adjusted EPS expected at $6.00 to $6.10 [11] - Management's guidance indicates a focus on continued investment in R&D and strategic global expansions [12]

Zoetis (ZTS) reported $2.32 billion in revenue for the quarter ended December 2024, representing a year-over-year increase of 4.7%. EPS of $1.40 for the same period compares to $1.24 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $2.3 billion, representing a surprise of +0.68%. The company delivered an EPS surprise of +2.19%, with the consensus EPS estimate being $1.37.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how the ...

Fourth Quarter and Full Year 2024 Financial Results February 13, 2025 Forward-Looking Statements This presentation 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; R&D costs; timing and likelihood of success; expectations regarding products, product approvals or products under development and expected timing of product launches; expectations regardi ...

Zoetis (ZTS) came out with quarterly earnings of $1.40 per share, beating the Zacks Consensus Estimate of $1.37 per share. This compares to earnings of $1.24 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 2.19%. A quarter ago, it was expected that this animal health company would post earnings of $1.46 per share when it actually produced earnings of $1.58, delivering a surprise of 8.22%.Over the last four quarters, the compan ...

Financial Performance - The company reported revenue of $2.3 billion for Q4 2024, a 5% increase compared to Q4 2023, with operational revenue growth of 6%[3] - Net income for Q4 2024 was $581 million, or $1.29 per diluted share, reflecting an 11% and 13% increase, respectively, on a reported basis[3] - For the full year 2024, revenue reached $9.3 billion, an 8% increase compared to 2023, with operational revenue growth of 11%[4] - Adjusted net income for full year 2024 was $2.7 billion, or $5.92 per diluted share, marking a 10% and 11% increase, respectively, on a reported basis[5] - Revenue for Q4 2024 was $2,317 million, a 5% increase from $2,213 million in Q4 2023[21] - Net income attributable to Zoetis for Q4 2024 was $581 million, up 11% from $525 million in Q4 2023[21] - Earnings per share (diluted) for Q4 2024 increased to $1.29, representing a 13% rise compared to $1.14 in Q4 2023[21] - Total revenue for the twelve months ended December 31, 2024, reached $9,256 million, an 8% increase from $8,544 million in 2023[21] - Net income attributable to Zoetis for the twelve months ended December 31, 2024, was $2,486 million, a 6% increase from $2,344 million in 2023[28] - Adjusted net income for the twelve months ended December 31, 2024, was $2,693 million, a 10% increase from $2,457 million in 2023[40] - Total earnings for the company were $3,133 million, a 7% increase from $2,936 million in 2023[63] Revenue Breakdown - Revenue in the U.S. segment for Q4 2024 was $1.3 billion, a 4% increase, while international segment revenue was $1.0 billion, reflecting a 6% increase on a reported basis[8] - Companion animal products in the U.S. saw a 7% increase, driven by products like Simparica Trio and the dermatology portfolio[8] - The company achieved 11% revenue growth in the U.S. and 10% operational revenue growth internationally for full year 2024[7] - Companion Animal revenue grew by 13% to $6,278 million, up from $5,576 million in 2023[51] - Livestock revenue remained stable at $2,898 million, showing no significant change from $2,890 million in 2023[51] - U.S. total revenue increased by 11% to $5,074 million, compared to $4,555 million in 2023[51] - International revenue for 2024 was $4,102 million, a 5% increase from $3,911 million in 2023[54] - U.S. revenue increased to $5,074 million in 2024, up 11% from $4,555 million in 2023[63] - International revenue rose to $4,102 million, reflecting a 5% increase from $3,911 million in the previous year[63] - Total reportable segments revenue reached $5,454 million, an 11% increase compared to $4,900 million in 2023[63] Guidance and Projections - The company expects full year 2025 revenue guidance of $9.225 to $9.375 billion, with diluted EPS of $5.70 to $5.80 on a reported basis[10] - The company is confident in sustaining above-market growth, guiding for 6% to 8% organic operational growth in revenue for 2025[7] - The company expects full-year 2025 revenue to be between $9,225 million and $9,375 million, with organic operational growth projected at 6% to 8%[43] - Adjusted diluted EPS for 2025 is forecasted to be between $6.00 and $6.10, reflecting a significant increase from previous periods[43] - The effective tax rate on adjusted income for 2025 is expected to be approximately 21%[43] Expenses and Costs - Research and development expenses for Q4 2024 were $186 million, a 7% increase from $174 million in Q4 2023[21] - Selling, general and administrative expenses for Q4 2024 rose to $625 million, an 11% increase from $565 million in Q4 2023[21] - Adjusted cost of sales for the twelve months ended December 31, 2024, was $2,714 million, representing a 7% increase from $2,548 million in 2023[40] - Adjusted SG&A expenses for the twelve months ended December 31, 2024, were $2,301 million, an 8% increase from $2,130 million in 2023[40] - Corporate costs increased by 16% to $1,213 million, up from $1,042 million in the previous year[65] Profitability Metrics - The company reported a gross profit of $1,610 million for Q4 2024, slightly up from $1,485 million in Q4 2023[24] - Gross profit in the U.S. segment rose by 8% to $1,028 million, with a gross margin of 81.8%[56] - International earnings increased by 6% to $523 million, with a gross margin of 67.7%[56] - The company reported a total earnings increase of 13% to $732 million for the period[56] - Gross profit margin in the U.S. improved to 81.6%, up from 80.2% in 2023[63] - The company reported a gross profit of $4,138 million in the U.S., which is a 13% increase from $3,655 million in 2023[63] Other Financial Information - Interest expense decreased by 14% to $51 million in Q4 2024 from $59 million in Q4 2023[21] - The provision for taxes on income for Q4 2024 was $151 million, a 19% increase from $127 million in Q4 2023[21] - Total acquisition and divestiture-related costs for the twelve months ended December 31, 2024, were $14 million net of tax, compared to $7 million in 2023[31] - The company reported a net loss of $3 million on the sale of businesses for the three months ended December 31, 2024[36] - Adjusted R&D expenses for the three months ended December 31, 2024, were $186 million, a 7% increase from $174 million in the same period of 2023[39]