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Investing.com - Leerink Partners downgraded Zoetis Inc . (NYSE:ZTS) from Outperform to Market Perform on Thursday, while setting a price target of $155.00. According to InvestingPro data, Zoetis currently trades at a P/E ratio of 27.2x, suggesting relatively high valuation compared to its near-term earnings growth potential.
The research firm cited concerns about Zoetis’s growth prospects over the next several years, pointing to increasing competition in legacy categories, particularly dermatology, and a loss of momentum in the Librela product launch.
Leerink’s downgrade was primarily driven by potential changes to the competitive landscape, noting heightened competition from ELAN and Merck (NYSE:MRK) in dermatology and parasiticides markets where Zoetis has historically maintained strong positions.
The firm forecasts 2025 earnings per share of $6.25 for Zoetis, compared to consensus estimates of $6.23, with 2026 EPS projected at $6.81 versus consensus of $6.83, and 2027 EPS at $7.26 against consensus of $7.49.
Leerink expects Zoetis to experience a deceleration from high-single-digit EPS growth to mid-single-digit growth, based on mid-single-digit sales growth and more modest levels of operating leverage, resulting in what the firm describes as "a more balanced risk-reward profile for the stock going forward."
In other recent news, Zoetis Inc. reported a strong performance in the first quarter, showing a 9% year-over-year operational organic revenue growth and an 8% increase in adjusted earnings per share. This growth was driven by significant gains in product lines such as the Simparica franchise, which grew 19%, and the OA pain franchise, which increased by 15%. Despite these positive results, UBS adjusted its price target for Zoetis to $170, citing weaker-than-expected sales trends in the U.S. for Librela and globally for dermatology products. Meanwhile, BTIG maintained a Buy rating with a $200 price target, reflecting confidence in Zoetis’ ability to sustain solid growth. Piper Sandler also reiterated an Overweight rating with a $210 price target, suggesting that new competition is unlikely to impact Zoetis’ future guidance. In addition, Zoetis announced the appointment of Dr. Mark Stetter to its Board of Directors, bringing extensive expertise in veterinary medicine. UBS reiterated a Neutral rating, noting the need for Zoetis to provide further assurances on maintaining its top-line outlook amid challenges.
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