Zoetis Inc. (ZTS)

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ZTShttp://www.nasdaq.com/symbol/ztsHealth Care2013Major Pharmaceuticals

Latest Zoetis Inc. (ZTS) company news

Jump In Pet Adoptions Is Good News For Animal Health Stocks

Pet adoptions from animal shelters across the nation accelerated significantly last month, climbing 9.4% year over year, a reversal of the 1.5% decline in July, according to data from Pethealth, which provides management software to animal shelters. That's good news for animal lovers, but also pharmaceutical companies, writes Credit Suisse's Erin Wilson Wright and her team.

By species, cat adoptions climbed 9.4% and dog adoptions were up 9.3%, (On average the price of a canine veterinary visit is some 30% higher than a feline visit, and according to Pethealth.) Adoptions from animal shelters still account for just 30% of new pet acquisitions (editor's note: Adopt, don't shop!), but the figures are still indicative of more demand, while . euthanasia, which, as you can imagine, is inversely correlated to pet demand, fell 17% in August, after a 15% decline in July.

Animal prescriptions are also on the rise, writes Wilson Wright:

According to monthly metrics from IMS HEALTH, adjusted total scripts prescribed by vets increased 3.0% in August, despite facing a difficult yoy comparison, relatively in line with last month's experience (+2.9%). Importantly, the metric continues to track ahead of human prescriptions (-0.2%). Of note, ~67% of veterinary medications are dispensed at veterinary practices, which we would note are not fully captured in this data

She writes that overall, pet adoption trends can be indicators of overall pet demand and are a useful guide for animal health companies.  Zoetis (ZTS) gets about a quarter of its sales from U.S. companion animals, but others include IDEXX Laboratories (IDXX), ABAXIS (ABAX), PetMed Express (PETS), Aratana Therapeutics (PETX), Henry Schein (HSIC), and Patterson Companies (PDCO).

Wilson Wright writes that she is positively biased toward industry leaders Zoetis and IDEXX following strong second-quarter performances, and innovative R&D pipelines.

The Health Care Select Sector SPDR ETF (XLV) is up more than 18% this year, and the SPDR S&P Pharmaceuticals ETF(XPH) is up almost 8%.  

Zoetis Could Report Significant Rise in Net Profit Margins in 2017

[unable to retrieve full-text content]Wall Street analysts have projected Zoetis’s 2017 net profit margins to be around 21.2%, which is year-over-year (or YoY) growth of around 440 basis points.

Favorable Foreign Exchange Fluctuations to Boost Zoetis’s Revenues

What Analysts Recommend for Zoetis in September 2017 PART 2 OF 3

Revenue performance

In its 2Q17 earnings conference call, Zoetis reiterated that it expects its year-over-year (or YoY) operational revenue growth in 2017 to fall in the range of 5.5% to 7.5%. However, owing to favorable foreign exchange fluctuations since May 2017, the company raised its projected range for 2017 to $5.15 billion to $5.25 billion. Further, based on its performance in 1H17, Zoetis has narrowed the range of its revenue guidance towards the higher end by around $25 million.

Increasing focus on direct-to-consumer marketing in the US and Brazil has played a pivotal role in driving demand for dermatology drugs Apoquel and Cytopoint in these markets. In 2Q17, Zoetis’s dermatology portfolio reported revenues of around $102 million, making it the first quarter ever when this portfolio managed to cross the $100 million quarterly revenue milestone. Currently, Apoquel and Cytopoint are used to treat 55% of the dogs suffering from dermatology problems in the US, which is an improvement in market share as compared to 1Q17.

Favorable Foreign Exchange Fluctuations to Boost Zoetis’s Revenues

If Zoetis’s dermatology portfolio continues to witness robust demand trends in 2H17, it may boost the company’s stock prices as well as those of the iShares Core S&P 500 ETF (IVV). Zoetis makes up about 0.15% of IVV’s total portfolio holdings.

Wall Street analysts have projected Zoetis’s 2017 revenues to be around $5.2 billion, which is YoY growth of around 6.3%. In 2017, peers Merck (MRK), Eli Lilly (LLY), and Sanofi (SNY) are expected to report revenues close to $40.3 billion, $22.5 billion, and $42.2 billion, respectively.

Cytopoint commercial launch

Dermatology drug Cytopoint reported revenues close to $15 million in 2Q17. The rapid adoption of this drug in the US is expected to help boost confidence in the drug in European markets. The company has already conducted an early experience program for Cytopoint in Europe and expects to fully launch the drug in this market in September 2017.

In the next article, we’ll discuss 2017 margin trends for Zoetis in greater detail.

What Analysts Recommend for Zoetis and Peers in September 2017

What Analysts Recommend for Zoetis in September 2017 PART 1 OF 3

Financial performance in 2Q17

In 2Q17, Zoetis reported revenues close to $1.3 billion, which is year-over-year (or YoY) growth of about 5% and YoY operational growth of around 6%. In absence of the ongoing product rationalizations, the company would have reported an even higher YoY operational revenue growth, close to 7% in 2Q17. The Companion Animal Health segment was the key driver of Zoetis’s revenue growth in 2Q17 and reported sales close to $568 million, which is 10% YoY growth on an operational basis. This performance was mainly driven by the increasing adoption of dermatology drugs, Apoquel and Cytopoint, and parasiticide Simparica. The company’s companion animal segment posted revenues close to $354 million in the US, which is YoY operational growth of around 7%. Further, the company also reported revenues worth $214 million from the sale of its companion animal products in international markets, which is YoY operational growth of 15%.

Zoetis’s livestock segment reported revenues close to $689 million in 2Q17, which is YoY operational growth of 3%. Recently launched products such as Cytopoint, Simparica, Stronghold Plus, and ongoing research programs for lifecycle innovations in the 300 existing product lines have also added significantly to the company’s revenue performance in 2Q17. As the company continues to launch new products in the US as well as in international markets such as Canada, Brazil, and Japan, there may be a positive impact on Zoetis’s stock prices as well as those of the SPDR S&P 500 ETF (SPY). Zoetis makes up about 0.15% of SPY’s total portfolio holdings.

What Analysts Recommend for Zoetis and Peers in September 2017 Analysts’ recommendations for Zoetis

Of the 21 analysts covering Zoetis in September 2017, seven have rated the stock a “strong buy,” seven have rated it a “buy,” and seven have rated it a “hold.”

Of the 21 analysts covering Merck (MRK) in September 2017, ~62.0% have rated the company a “buy.” Approximately 64.0% of the 22 analysts covering Eli Lilly (LLY) gave it a “buy” recommendation, while 50.0% of the 26 analysts tracking Regeneron Pharmaceuticals (REGN) rated it a “buy.”

In the next article, we’ll discuss revenue growth prospects for Zoetis in greater detail.

See what the IHS Markit Score report has to say about Zoetis Inc.

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Zoetis Inc

NYSE:ZTS

Score: Positive (86)

12 days at current score.

Upgraded from Neutral on September 8th 2017

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Summary


  • This company ranked positively in all 3 IHS Markit categories and the Healthcare sector
  • ETFs holding this stock are seeing positive inflows
  • Bearish sentiment is low
  • Economic output in this company's sector is expanding

Bearish sentiment

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Bearish sentiment

Short interest | Positive

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Short interest is extremely low for ZTS with fewer than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting ZTS.

Money flow

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Money flow

ETF/Index ownership | Positive

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ETF activity is positive. Over the last month, ETFs holding ZTS are favorable, with net inflows of $8.73 billion. Additionally, the rate of inflows is increasing.

Economic sentiment

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Economic sentiment

PMI by IHS Markit | Positive

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According to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Healthcare sector is rising. The rate of growth is strong relative to the trend shown over the past year.

Credit worthiness

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Credit worthiness

Credit default swap

CDS data is not available for this security.

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full report." data-reactid="99">This document has been produced for information purposes only and is not to be relied upon or as construed as investment advice. To the fullest extent permitted by law, IHS Markit disclaims any responsibility or liability, whether in contract, tort (including, without limitation, negligence), equity or otherwise, for any loss or damage arising from any reliance on or the use of this material in any way. Please view the full legal disclaimer and methodology information on pages 2-3 of the full report.

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