Zoetis Inc. (ZTS) is the world’s leading animal health company, driven to nurture the world and humankind by advancing care for animals. The company reported solid financial results for the third quarter of 2024, posting a record quarterly revenue of $2.39 billion, surpassing analysts’ estimate of $2.29 billion. Also, its non-GAAP EPS of $1.58 was above the consensus estimate of $1.46.

The company delivered 14% operational growth in revenue and 15% operational growth in its adjusted net income for the third quarter. Also, its revenue in the U.S. segment was up by 15% from the prior year, totaling $1.35 billion.

ZTS continued to advance its innovation and its efforts towards the care of animals across the globe. The company recently received approval in China for Apoquel® Chewable (oclacitinib chewable tablet) for controlling pruritus associated with allergic dermatitis and control of atopic dermatitis in dogs.

It also received approval in the EU for an additional claim related to efficacy against notoedres mange for its Revolution® Plus which is a topical combination product to treats ticks, fleas, ear mites, lice and gastrointestinal worms and prevents heartworm disease in cats. It also received approval for Valcor™, Fostera® Gold PCV, Poulvac Maternavac®, and Synovex® Primer™ in different regions, catering to a variety of concerns.

Further, in September, ZTS expanded its India Capability Center in Hyderabad, India, which will play a crucial role in driving its digital transformation, improving efficiencies, and advancing its vision to shape the future of animal care.

Shares of ZTS have surged 2.7% over the past six months to close its last trading session at $176.94.

Let’s look at factors that could influence ZTS’ performance in the upcoming months.

Robust Financials

ZTS’ revenue increased 11% year-over-year to $2.39 billion during the third quarter that ended September 30, 2024. Its non-GAAP gross profit grew 11.4% from the year-ago value to $1.69 million. The company’s income before the provision of taxes on income of $874 million indicates a growth of 21.9% from the prior year’s quarter.

In addition, non-GAAP net income attributable to Zoetis came in at $716 million and $1.58 per share, up 13.8% and 16.2% year-over-year, respectively.

Building on the company’s strong momentum through the three quarters of the year, ZTS raised its financial guidance for the full year 2024. The company now projects revenue between $9.20 billion and $9.30 billion, reflecting operational growth of 10% to 11%. ZTS’ adjusted EPS is projected at $5.86 to $5.92. Also, its adjusted net income is expected to be $2.67 billion to $2.69 billion.

Solid Historical Growth

ZTS’ revenue and EBITDA have grown at respective CAGR of 6.3% over the past three years. The company’s EBIT has increased at a CAGR of 6.8% over the same timeframe, while its net income and EPS have improved at CAGRs of 7% and 8.6%, respectively.

Furthermore, the company’s tangible book value and levered free cash flow have grown at CAGRs of 47.8% and 9.1% over the past three years, respectively.

Favorable Analyst Estimates

Analysts expect ZTS’ revenue for the fourth quarter (ending December 2024) to increase 5.2% year-over-year to $2.33 billion. The consensus EPS estimate of $1.38 for the ongoing quarter indicates an 11.4% year-over-year improvement. Moreover, ZTS has an impressive earnings surprise history, having topped the consensus revenue estimates in each of the trailing four quarters.

For the fiscal year ending December 2024, the company’s revenue and EPS are expected to grow 8.5% and 10.4% year-over-year to $9.27 billion and $5.88, respectively. Additionally, Street expects its revenue and EPS for the fiscal year 2025 to increase 5.1% and 9.2% year-over-year to $9.74 billion and $6.41, respectively.

High Profitability

ZTS’ trailing-12-month gross profit margin of 70.09% is 20.6% higher than the industry average of 58.10%. Its trailing-12-month EBITDA margin and levered FCF margin of 41.13% and 20.46% are significantly higher compared to the industry averages of 5.54% and 2.33%, respectively. Similarly, its trailing-12-month CAPEX/Sales of 6.96% is 121.1% higher than the industry average of 3.15%.

POWR Ratings Reflect Promise

ZTS’ solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZTS has a B grade for Quality and Sentiment, consistent with its higher-than-industry profitability and optimistic analyst estimates.

In addition, the stock also has a B grade for Stability, which is justified by its 5-year beta of 0.90.

ZTS is ranked #21 in the 155-stock Medical - Pharmaceuticals industry.

Beyond what I have stated above, we have also given ZTS grades for Value, Momentum, and Growth. Get access to all the ZTS ratings here.

Bottom Line

ZTS is a leading animal health company that is engaged in the formation and delivery of animal health medicines. The company has maintained a strong industry position through its innovative products and solutions, catering to diverse concerns. The company has maintained a strong financial front, and with its strategic expansion in different regions, it is poised for continued growth.

Zoetis’ long-term prospects are also robust, as are its diverse product offerings and successful acceptance of its products from authorities and customers, as reflected by its strong operational revenue growth.

Therefore, with solid financial performance, accelerating profitability, reliable dividends, and a promising growth outlook, ZTS could be an ideal portfolio addition for now.

How Does Zoetis Inc. (ZTS) Stack Up Against Its Peers?

While ZTS has an overall POWR Rating of B, investors could also check out these other stocks within the Medical - Pharmaceuticals industry with A (Strong Buy) or B (Buy) ratings: Bristol-Myers Squibb Co. (BMY), Supernus Pharmaceuticals, Inc. (SUPN), and Taro Pharmaceutical Industries Ltd. (TARO).

For exploring more A and B-rated industrial stocks, click here.

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ZTS shares were trading at $175.86 per share on Wednesday afternoon, down $1.08 (-0.61%). Year-to-date, ZTS has declined -10.02%, versus a 28.79% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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