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On Tuesday, Stifel analysts maintained their positive stance on Zoetis Inc . (NYSE:ZTS) with a Buy rating and a price target of $180.00. According to InvestingPro data, the company maintains a GOOD financial health score, with particularly strong profitability metrics. The stock is currently trading near its Fair Value, suggesting balanced market pricing. The analysts highlighted the company’s impressive year-over-year growth for its top products, noting that Zoetis’ top 5, top 10, and top 20 products all saw over 20% growth. This performance suggests that the company’s success is not limited to just a few offerings. The company’s overall revenue grew 8.33% year-over-year, maintaining a robust gross margin of 70.64%.
Despite the strong growth in key products, the analysis indicated that products outside the top 20, which represent approximately 30% of Zoetis’ revenue, experienced a low double-digit percentage decline year-over-year. The analysts pointed out that product diversification remains important, especially as competition in the Dermatology and Parasiticide sectors is expected to intensify. These sectors combined made up about 40% of Zoetis’ revenue in 2024.
From a financial leverage perspective, the report found that selling, general, and administrative (SG&A) expenses remained flat as a percentage of sales at 24.9%, despite an 8% year-over-year increase in reported sales for 2024. The analysts expressed surprise at the lack of greater leverage in SG&A expenses, particularly after reviewing the 10-K filing, which revealed a year-over-year reduction in total employees, primarily in general and administrative functions, and consistent advertising expenses relative to sales.
In other recent news, Zoetis Inc. reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $1.40, compared to the forecasted $1.38. The company’s revenue for the quarter was $2.32 billion, which met the anticipated forecasts. Zoetis demonstrated robust performance throughout 2024, with full-year revenue reaching $9.3 billion, an 8% increase on a reported basis and an 11% rise operationally. The U.S. market contributed $5.1 billion, marking an 11% increase, while international revenue grew by 10% operationally to $4.1 billion.
Additionally, BTIG adjusted its price target for Zoetis from $225.00 to $200.00, maintaining a Buy rating on the stock. The adjustment reflects a stronger U.S. dollar and a $355 million revenue divestiture in BTIG’s analysis for 2025. Despite the company’s 2025 guidance falling short of consensus expectations, BTIG remains confident in Zoetis’ market position and growth potential. Zoetis’ companion animal segment showed significant growth, with a 14% year-over-year operational increase, driven by its osteoarthritis pain management franchise, which surged 80%.
The company has set its 2025 revenue guidance at $9.225-$9.375 billion, expecting a 6-8% organic operational growth. Adjusted diluted EPS for 2025 is projected between $6.00 and $6.10. Zoetis anticipates double-digit growth in its Simparica, dermatology, and osteoarthritis pain franchises. Despite challenges such as increased competition and macroeconomic pressures, Zoetis remains optimistic about its future, leveraging its strong market position and diverse product portfolio to drive continued growth.
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