HSBC has reduced its price target for Zoetis (ZTS, Financial) shares from $225 to $180, although maintaining a Buy rating. This move reflects the potential challenges posed by new U.S. tariffs and significant patent expirations, which could impact earnings in the biopharma sector. The introduction of a 25% U.S. tariff could potentially lead to an earnings decline of approximately 6%-14% in the innovative pharma segment, according to HSBC's analysis.
The financial institution's research suggests that additional pressures on earnings might arise from factors such as changes in tax rates, contingent on how tariffs are implemented. This adds to the complexity of the earnings landscape for Zoetis, considering the broader economic and legislative influences like the Part D and Inflation Reduction Act. Investors are advised to consider these potential risks when assessing the company’s financial outlook.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 16 analysts, the average target price for Zoetis Inc (ZTS, Financial) is $199.62 with a high estimate of $238.00 and a low estimate of $165.00. The average target implies an upside of 30.07% from the current price of $153.47. More detailed estimate data can be found on the Zoetis Inc (ZTS) Forecast page.
Based on the consensus recommendation from 20 brokerage firms, Zoetis Inc's (ZTS, Financial) average brokerage recommendation is currently 1.9, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Zoetis Inc (ZTS, Financial) in one year is $206.60, suggesting a upside of 34.62% from the current price of $153.47. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Zoetis Inc (ZTS) Summary page.
ZTS Key Business Developments
Release Date: February 13, 2025
- Revenue: $9.3 billion for the year, growing 8% on a reported basis and 11% operationally.
- Adjusted Net Income: $2.7 billion, growing 10% on a reported basis and 15% operationally.
- Companion Animal Portfolio Revenue Growth: 14% operationally.
- Simparica Franchise Revenue: $1.4 billion, growing 28% operationally.
- Simparica Trio Revenue: Exceeded $1 billion globally.
- OA Pain Franchises Revenue: $581 million globally, growing 80% operationally.
- Key Dermatology Franchise Revenue: $1.6 billion, growing 17% operationally.
- Livestock Portfolio Revenue: $2.9 billion, growing 5% operationally.
- US Revenue Growth: 11% for the year.
- International Revenue Growth: 10% operationally for the year.
- Adjusted Gross Margin: 70.7%, growing 50 basis points on a reported basis.
- Adjusted Operating Expenses Growth: 10% operationally for the year.
- Share Repurchase: $1.9 billion of Zoetis shares repurchased in 2024.
- Dividend Increase: 15% during the year, distributing $786 million to shareholders.
- 2025 Revenue Guidance: $9.225 billion to $9.375 billion, representing 6% to 8% organic operational growth.
- 2025 Adjusted Net Income Guidance: $2.7 billion to $2.75 billion, representing 6% to 8% organic operational growth.
- 2025 Adjusted Diluted EPS Guidance: $6 to $6.10.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zoetis Inc (ZTS, Financial) reported double-digit operational revenue growth of 11% for the full year 2024, driven by strong demand for its products.
- The company's companion animal portfolio saw a 14% operational revenue growth, with significant contributions from the Simparica franchise and OA pain franchises.
- Zoetis Inc (ZTS) achieved a 15% operational growth in adjusted net income, reflecting strong financial performance.
- The company successfully launched Librela in the US, marking it as the most successful launch in its history, contributing to an 80% operational revenue growth in the OA pain franchises.
- Zoetis Inc (ZTS) maintained a strong commitment to innovation, with expectations of at least one major product approval annually over the next several years, supporting long-term growth.
Negative Points
- The livestock portfolio faced headwinds due to the divestiture of the Medicated Feed Additives product portfolio, impacting overall growth.
- Foreign exchange posed a challenge, with a reported unfavorable impact on gross margins and revenue projections for 2025.
- The company anticipates increased competition in key areas such as dermatology, which could impact growth in the latter half of 2025.
- Zoetis Inc (ZTS) faces potential headwinds from new market entrants and regulatory changes, which could affect future performance.
- The company's guidance for 2025 reflects a slowdown in price-driven growth compared to previous years, indicating potential challenges in maintaining high growth rates.
