Parsippany, New Jersey-based Zoetis Inc. (ZTS) discovers, develops, and commercializes animal health medicines, vaccines, and diagnostic products and services. With a market cap of $79.9 billion, Zoetis’ operations span over 100 countries in North America, Europe, and internationally.
The animal health giant has significantly underperformed the broader market over the past year. ZTS stock has declined 10.3% on a YTD basis and gained 4.9% over the past 52 weeks lagging behind the S&P 500 Index’s ($SPX) rally of 25.5% in 2024 and 35.7% over the past 52-week period.
Narrowing the focus, ZTS has also underperformed the SPDR S&P Pharmaceuticals ETF’s (XPH) 13.3% gains on a YTD basis and 34% returns over the past year.
Despite reporting better-than-expected results, Zoetis’ stock dipped 3.7% after the release of its Q3 earnings on Nov. 4. The company reported a robust 11% year-on-year growth in revenue, reaching $2.4 billion. Zoetis has continued to observe substantial increases in the U.S. and international markets. Its U.S. segment reported an impressive 15% revenue growth to $1.3 billion, driven by solid demand for companion animal products. Sales of livestock products also increased, with a 7% growth in the international segment on a reported basis.
The company also reported an impressive growth in profitability with its adjusted net income growing 13.8% year-on-year, reaching $716 million and its adjusted EPS of $1.58 surpassed analysts’ earnings estimates by a notable 8.2%. Moreover, observing the robust Q3 results and underlying strength in companion animal products, Zoetis raised its full-year guidance for revenue and adjusted EPS.
For the current fiscal, ending in December, analysts expect ZTS to report a 10.9% year-over-year growth in adjusted EPS to $5.90. The company’s earnings surprise history is mixed. It surpassed analysts’ bottom-line estimates in three of the past four quarters while missing on another occasion.
ZTS has a consensus “Strong Buy” rating overall. Out of the 15 analysts covering the stock, 14 recommend a “Strong Buy” and one advises a “Moderate Buy” rating.
On Oct. 11, JPMorgan Chase & Co. (JPM) analyst Chris Schott maintained an “Overweight” rating on ZTS while raising the price target to $230.
The mean price target of $220.54 represents a premium of 24.6% to current price levels. The Street-high target of $248 suggests a potential upside of 40.1%.
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