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Zoetis Inc Class A ZTS

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Morningstar’s Analysis

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PREMIUM

5-Star Price

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Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Zoetis Posts Impressive Growth in Third Quarter Despite Generic Intrusion; No Change to Our FVE

Debbie S. Wang Senior Equity Analyst

Analyst Note

| Debbie S. Wang |

Zoetis delivered another strong quarter, which was particularly impressive, as the prior-year period also featured double-digit top-line growth driven by the roll back of shelter-at-home orders. As the firm generally remains on track to reach our full-year projections on the top and bottom lines, we’re leaving our fair value estimate unchanged. Consistent with the long-standing pattern, Zoetis saw the companion animal business lead the way with 19% year-over-year operational growth, which was supported by strength from the U.S. as well as internationally. In contrast, the production animal segment was down 2% in the third quarter operationally, and the main softness came from the U.S. We remain confident in Zoetis’ wide economic moat, especially as the firm has embarked on commercialization of its monoclonal antibody therapies for osteoarthritis in dogs and cats. We think this type of innovation is a good example of Zoetis’ prowess for productive R&D and should add to the firm’s intangible assets through the long term.

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Company Profile

Business Description

Zoetis sells anti-infectives, vaccines, parasiticides, diagnostics, and other health products for animals. The firm earns slightly less than half of total revenue from production animals (cattle, pigs, poultry, and so on), and more than half from companion animal (dogs, horses, cats) products make up the other half. Its U.S. business is heavily skewed toward companion animals, while its international business is slightly skewed toward production animals. The firm has the largest market share in the industry and was previously Pfizer's animal health unit.

Contact
10 Sylvan Way
Parsippany, NJ, 07054
T +1 973 822-7000
Sector Healthcare
Industry Drug Manufacturers - Specialty & Generic
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Classic Growth
Employees 11,300

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