Zoetis: Back On Track In Q4, Regaining Premium Valuation
(Preview) Company Update (ZTS US) (Buy)
Summary
Zoetis shares rose 5.4% on Tuesday after Q4 2022 results showed the company's growth back on track; the P/E is now back to 35x.
Operational revenue growth was 9% in Q4, with strong growth in key new products and the "majority" of supply issues resolved.
Management expects operational growth of 6-8% in revenues and 7-9% in Adjusted Net Income in 2023, and no major new competition.
P/E is now 35x and we expect a small de-rating to 32.5x, but long-term returns should trend towards 12% a year, driven by EPS growth.
With shares at $171.90, we expect a total return of 29% (9.3% annualized) by 2025 year-end. Buy.
Introduction
Zoetis Inc. released their Q4 2022 results on Tuesday (14 February). Zoetis shares finished the day up 5.4%, taking their year-to-date rebound to more than 17%.
Q4 2022 results showed that Zoetis’s growth is back on track, with revenue growing 9% year-on-year operationally. Key new products continue to grow strongly, and the “majority” of previous supply issues have be…