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Zoetis: Good Time To Start Building Position In This Animal Health Player

May 06, 2020 6:57 PM ETZoetis Inc. (ZTS)PFE5 Comments
Healthcare on the Move profile picture
Healthcare on the Move


  • Zoetis is a leading player in the rapidly growing animal health segment.
  • The company has been focusing on innovation in many high growth areas of the animal health business.
  • The COVID-19 pandemic may have a short-term impact on the company's share prices, thereby opening up lucrative entry opportunities for retail investors.

Zoetis (NYSE:ZTS) has emerged as one of the less affected companies in the COVID-19 pandemic. Although this leading animal health player also got beaten with the broader market in March, the stock has recovered much of its losses. The company is now down by only 3.71% YTD (year-to-date).

A spin-off of Pfizer (PFE) from early 2013, the company has been fast to capitalize on the increasing global demand for pet care products and animal protein. The company manufactures and commercializes medicines, vaccines, and diagnostic products for companion animals as well as livestock animals. Although more resilient to COVID-19 than many others, the pandemic has exposed the company to certain short-term headwinds. While the impact was not felt as much in the first quarter, the company expects them to be more evident in the rest of 2020. I believe that this can result in some emotional selling for the stock and lead to attractive entry points for retail investors.

The fundamental story of Zoetis is largely intact

Zoetis reported $6.3 billion and an adjusted net income of $1.8 billion in 2019. Both top and bottom line exceeding the high end of the company's fiscal 2019 guidance. Revenues were up 7% YoY, despite a 3% negative impact due to FX. The company reported revenue of $1.5 billion in the first quarter of 2020, a YoY rise of 5%. Net income was $423 million, or $0.88 per diluted share, a YoY increase of 36% and 35%, respectively, on a reported basis.

The companion animal business has been the key growth driver as the expanding middle-class population chooses to spend increasingly on pet care. According to the American Pet Products Association, the total spending on pets in the U.S. was close to $95.7 billion in 2019. Of these, pet food and treats accounted for $36.9 billion while vet care

This article was written by

Healthcare on the Move profile picture
I am an MBA in finance and an engineering graduate. I have also completed the CFA certification.I am involved in international trade and have been passionately tracking global equity markets for more than 7 years. I mainly focus on spotting long-term value investments in biotechnology, pharmaceutical, hospital, and medical device sectors. In the last two years, I have also been studying cannabis and hemp sectors.

Analyst’s Disclosure: I/we 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.

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Comments (5)

captaindividend profile picture
Interesting company bought a few weeks ago at lows when it was covered on CNBC.
Jill Thompson, CFA profile picture
Thanks for the article. Have you done a comparative analysis vs Idexx Labs (IDXX)? I prefer the latter, and admittedly know the story better: higher growth, more consumable driven (razor/razor blade), and dominant market share in vet clinics.
Doggggs profile picture
Thanks for the article. This pandemic has only strengthened the bond between owner and pet. The already explosive growth in the companion animal coming into this, will shock people coming out of this. Don't care about livestock. Buying all dips.
Good points, tks.
The outcome of Corona will be full seen only in the Q2 report.
People who get unemployed will reduce spending on expensive meat and on pets, how much will be seen starting from Q2.
Zoetis is in a growing market with a good management.
It's difficult to find a reasonable entry point. Estimate earnings in 2021 4,25$ ?
Then x 26 gives 110 $ per share. I think it's good to wait for this.
The Dividend Dog profile picture
This is already known and baked in. There are no surprises coming up, everyone is aware Q2 is going to be bad. For a long term investor, anything under $125 is fine as an entry. This company is rock solid and will have market beating growth over the next decade.
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