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On Wednesday, UBS analyst Andrea Alfonso adjusted the price target for Zoetis Inc . (NYSE: NYSE:ZTS) shares, lowering it to $170.00 from the previous $189.00 while keeping a Neutral rating on the stock. The animal health company, currently valued at $68.8 billion, trades at $154.25 per share with a P/E ratio of 27.91. According to InvestingPro data, four analysts have recently revised their earnings expectations downward for the upcoming period. Alfonso’s analysis followed a recent earnings call and discussions with the company’s management, which shed light on several factors affecting the company’s performance.
The analyst noted that investor attention had been drawn to weaker-than-expected sales trends, particularly in the U.S. for the company’s Librela pain franchise and globally for its dermatology products. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with an 8.33% revenue growth and a healthy 70.64% gross profit margin. The sales of Librela in the U.S. did not meet expectations, which the company believes is not due to safety concerns raised by a "Dear Vet" letter but rather the need for a more effective marketing approach targeting veterinarians specializing in pain management and pet owners who are aware of negative media coverage.
Additionally, sales of Cytopoint, an injectable product, were below projections. The company suggested that weather conditions might have influenced these results, as such treatments require pets to visit the office, unlike medications that can be obtained at retail outlets.
Zoetis also acknowledged the potential risks associated with the imposition of a 25% tariff duty rate on pharmaceutical products imported into the U.S., mainly from China. However, the company pointed out its strong domestic base in the U.S. and its status as a net exporter, which could align with the administration’s trade objectives.
Despite these challenges, UBS did not perceive the recent top-line performance as a fundamental change to the company’s overall outlook. InvestingPro analysis reveals the company maintains a GREAT financial health score of 3.1, with strong cash flows and moderate debt levels. The Q1 performance, particularly in high-growth product categories, suggests that the company may need to provide further assurances that it can maintain its top-line outlook until new innovations can rejuvenate sales. Given these circumstances, UBS foresees limited potential for an expansion of the company’s stock multiple in the near term and thus maintains a Neutral rating. Investors seeking deeper insights can access comprehensive analysis and 10 additional ProTips through InvestingPro’s detailed research report.
In other recent news, Zoetis Inc. reported its Q1 2025 earnings, surpassing expectations with earnings per share (EPS) of $1.48, compared to the forecasted $1.41, and revenue of $2.22 billion, exceeding the anticipated $2.20 billion. Despite these positive results, Leerink Partners adjusted its price target for Zoetis to $180 from $190, maintaining an Outperform rating. This adjustment reflects a mixed quarter, with strong performance in parasiticides and dermatology, but a decline in U.S. sales of Librela. The decline in Librela, a key growth driver, was attributed to macroeconomic pressures, prompting a cautious outlook on its long-acting OA pain monoclonal antibody. Zoetis continues to face manageable tariff impacts on core EPS growth, currently estimated at about 1%. Looking forward, Zoetis anticipates a full-year revenue of $9.425 to $9.575 billion and an adjusted diluted EPS of $6.20 to $6.30. The company remains optimistic about its core revenue drivers and expects double-digit growth in its key franchises, despite potential challenges from competition and regulatory changes.
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