Zoetis: EPS Down In Q3, But Only Due To Currency & Supply Chain Disruption
(Preview) Company Update (ZTS US) (Buy)
Summary
Zoetis shares fell 11% on the day of Q3 results, as investors reacted to a 3.7% decline in its Adjusted EPS; shares are down 39% this year.
Much of the EPS decline was due to currency and a higher tax rate, though operational revenue growth of 5% still disappointed.
Supply chain disruptions and labor shortages at vet clinics reduced growth; there was also an exceptional generics headwind.
Management expects most supply chain issues to be resolved by year-end. There were also good news on key products.
With shares at $142.61, the P/E is 30x, and we expect a total return of 62% (16.8% annualized) by 2025 year-end. Buy.
Introduction
Zoetis Inc. released their Q3 2022 results last Thursday (November 3). Shares fell 11% on the day of the results and, while they have recovered about half of that loss since, remain 39% down year-to-date. Compared to when we upgraded our rating to Buy in February, ZTS stock has lost 26% after dividends
Q3 results were worse than our investment case, but mostl…