Zoetis Inc. Struggles to Keep Pace Despite Solid Earnings

Stock Performance Trails Market as Gains Fall Short

Parsippany, New Jersey-based Zoetis Inc. (ZTS) is a leading company in the animal health sector, focusing on the discovery, development, and commercialization of medicines, vaccines, and diagnostic products. With a substantial market capitalization of $79.9 billion, Zoetis operates in over 100 countries across North America, Europe, and beyond.

Over the last year, however, the company has not performed as well as the broader stock market. Since the beginning of the year, ZTS stock has dropped 10.3%, and it only gained 4.9% over the past 52 weeks. In contrast, the S&P 500 Index ($SPX) saw a rally of 25.5% in 2024 and climbed 35.7% over the previous year.

Further analysis reveals that ZTS lagged behind the SPDR S&P Pharmaceuticals ETF (XPH), which achieved 13.3% growth on a year-to-date basis and an annual return of 34%.

Despite beating expectations with its quarterly results, Zoetis’ stock fell 3.7% following the announcement of its Q3 earnings on November 4. The company reported a notable 11% year-over-year revenue growth, totaling $2.4 billion. Significant increases were seen in both U.S. and international markets, with the U.S. segment achieving a remarkable 15% revenue growth to $1.3 billion, primarily driven by high demand for companion animal products. Additionally, livestock product sales contributed to a 7% increase in revenue for the international sector.

Zoetis also showed robust improvement in profitability, with its adjusted net income rising 13.8% year-over-year to $716 million. The adjusted EPS reached $1.58, exceeding analysts’ forecasts by 8.2%. Given the positive Q3 results and growth in companion animal products, Zoetis raised its full-year revenue and adjusted EPS guidance.

For the ongoing fiscal year ending in December, analysts predict a 10.9% increase in adjusted EPS to $5.90. However, ZTS’s history of earnings surprises has been mixed, with the company beating expectations in three of the last four quarters while falling short on one occasion.

The overall consensus rating for ZTS is a “Strong Buy.” Out of the 15 analysts covering the stock, 14 recommend a “Strong Buy,” and one suggests a “Moderate Buy.”

On October 11, analyst Chris Schott from JPMorgan Chase & Co. (JPM) reaffirmed an “Overweight” rating for ZTS and raised the price target to $230. The average price target of $220.54 indicates a potential upside of 24.6% from current levels, while the highest target of $248 suggests a substantial upside of 40.1%.

On the date of publication, Aditya Sarawgi did not hold any positions in the securities mentioned in this article. All information and data in this article are provided for informational purposes only. For more details, please refer to the Barchart Disclosure Policy here.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.