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The initial public offering for Zoetis, previously Pfizer's animal health business, has been successful. The stock opened on February 1 at $31.50 and has gained 9.13% since its opening.

What initially makes Zoetis attractive to investors is that it is the only animal health company publicly traded on the open market. The company's niche greatly helped its initial public offering which raised $2.6 billion through the sale of 99.0 million shares, including 12.9 million optional shares sold by the underwriters.

The IPO provides potential for capital gains in both the newly issued Zoetis (NYSE:ZTS) stock as well as the equity traded publicly for Pfizer (NYSE:PFE).

In fiscal year 2011, Zoetis reported revenue of $4.2 billion, making it the largest global animal health and vaccine business. It has a portfolio of over 300 products that provide animal health solutions for livestock and companion animals globally. Revenue for the company through September 30, 2012 is on pace to exceed 2011 at $3.2 billion. Year-to-date through September 30, 2012 the company has reported net income of $446 million, an increase of 27% from 2011, further exemplifying the company's efficient operating capabilities.

As a standalone business, Zoetis will have greater flexibility to capitalize on its research and development advantages which helped it to obtain one-fourth of U.S. animal health medicine approvals over the seven year period from 2004 to 2011. Through the same period Zoetis also obtained approximately one-fifth of animal health vaccine approvals from the U.S. Department of Agriculture, further demonstrating its leadership position in the animal health business.

Given its product development track record and distribution agreements, the company is on target to consistently exceed year-over-year product revenue and earnings growth, creating significant upside potential for the newly offered stock.

Meanwhile, the divestiture of the Zoetis business also improves Pfizer's valuation, making its stock more attractive in the open market.

The sale of the business will add value for Pfizer's shareholders and allow Pfizer to focus on its core human health biopharmaceutical business, reported Pfizer's CEO, Ian Read.

"We are better positioned to focus on our core business as an innovative biopharmaceutical company, by unlocking value from the animal health business that will return value to Pfizer shareholders," stated Read in February 1 comments on Zoetis' IPO.

The added value and deeper focus on Pfizer's core business will help improve earnings for the company, which were down considerably in the fourth quarter. In the earnings Pfizer reported a top line revenue decline of 7% from the comparable quarter and a 10% decline in full year 2012 revenue from the previous year. Adjusted net income was also down 7% from the comparable quarter and 2012 full year net income was down 8% from the previous year.

In the company's fourth quarter earnings report, management outlined their guidance for 2013, reflecting the improved value created from the Zoetis sale.

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In fourth quarter earnings comments, Frank D'Amelio, Pfizer's Chief Financial Officer, stated the company's intent to improve shareholder value through share repurchases funded from the proceeds of the Zoetis transaction, stating the company would allocate the proceeds to share repurchases as well as other value-creating opportunities.

The company's revenue guidance and intent to use proceeds to repurchase outstanding shares give its stock value greater upside potential pushing its one-year price target1 to $28.25. At a current price of $27.65 the stock trades at a discount to its price target making Pfizer a more valuable investment following the animal health business sale.

1 The price target is derived from Bodie, Kane and Marcus' intrinsic value formula. The intrinsic value formula discounts the projected one-year future cash flow value by the risk-free rate on the one-year Treasury note plus a beta of 0.72 times the market's expected one-year risk premium. The market risk premium assumes stock market appreciation in 2013 to be similar to 2012 and is based on Dow Jones Industrial Average index return.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.