Zoetis: Q1 Reassured on New Competitors, Librela & Tariffs
Company Update (ZTS US) (Buy): Key franchises growing strongly, and revenues still expected to grow 6-8% organically in 2025.
Highlights
Revenues grew 9% organically in Q1; EPS grew 5.3% in $ after one-offs.
Simparica, Key Dermatology each grew 10%+ despite Elanco entries.
U.S. Librela sales grew 17% despite adverse events and FDA label update.
2025 guidance mostly unchanged, with higher Adjusted EPS now expected.
At $159.27, we see a 61% total return (14.2% p.a.) by 2028 year-end. Buy.
Introduction
We review our Buy rating on Zoetis after the release of Q1 2025 results on Tuesday (May 6) and the disclosure by Terry Smith’s Fundsmith that their main fund has initiated a “currently small” holding in Zoetis last month.
Zoetis shares fell 5.2% after Q1 results but have more than recovered; they are still 5.8% lower than a year ago:
Zoetis Share Price (Last 1 Year)
Source: Google Finance (10-May-25).
We re-initiated our Buy rating on Zoetis in March 2024, but have so far not included it in our “Select 15” model portfolio. Shares are currently down 4.4% since this re-initiation (after dividends). Zoetis was a profitable investment for “Select 15” between January and March 2023; we also made a 5.6x return on the stock in real life between 2014 and 2023. We first published our research on Zoetis publicly in 2019.
Our view on Zoetis has been that Adjusted EPS growth will return to ~10% over the medium term but will be lower in the near term, due to new rivals for two of its blockbusters and a number of one-offs. Q1 results support this view, and also show that Zoetis will see only a slight direct impact from Donald Trump’s new tariffs.
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