Zoetis stock plummeted Thursday, undercutting its 50-day line, after the animal health player missed guidance expectations for 2025.
For the year, the company expects to earn an adjusted $6 to $6.10 per share. Earnings would inch ahead about 2% at the midpoint. But that lagged forecasts for $6.27 a share, according to FactSet. The company also guided to about $9.23 billion to $9.38 billion in sales, well below projections for $9.51 billion.
But William Blair analyst Brandon Vazquez says investors are missing two key points. The company sold its medicated feed additive portfolio to Phibro Animal Health last year. That business generated about 18 cents in EPS, Vazquez said in a report. Normalizing for that puts profit growth at 6%, which is more in line with historical growth rates.
"Zoetis' messaging also implies there are certain interest and tax headwinds baked into 2025 EPS guidance and normalizing for these would point to 8% to 10% bottom-line growth," he said. "We await more details on the call but suspect the moving pieces could weigh on the stock."
Zoetis stock tumbled 5.2%, closing at 164.93. Shares are consolidating with a buy point at 201.92, according to MarketSurge. But Zoetis stock undercut its 50-day moving average on Thursday and remains below its 200-day line. Both will provide resistance to a breakout.
Zoetis Stock: Sales, Earnings Beat
Across all products, Zoetis earned an adjusted $1.40 per share on $2.32 billion in fourth-quarter sales. Earnings rose 13% and beat forecasts by 4 cents. Sales grew 5% — or 6% on an operational basis — and topped expectations for $2.21 billion.
Zoetis is best known for its pet health division. During the fourth quarter, sales of products for pets grew 8% to $1.57 billion. That beat forecasts for $1.52 billion. Livestock sales fell 3% to $726 million, missing projections for $737 million.
On an operational basis, pet sales grew 9% and livestock revenue rose 1%.
"We view companion animal as the main driver of sentiment for the shares and were encouraged to see 9% global growth in the segment despite concerns about FX (foreign exchange) headwinds and OA (osteoarthritis) ramp," Vazquez said.
The osteoarthritis ramp refers to Librela, a treatment for dogs. Last year, Zoetis faced backlash and a lawsuit alleging the company failed to warn dog owners of the drug's potential side effects. Earlier this month, Zoetis announced it had updated the label for Librela to include side effects found in real-world testing.
Strong Pipeline Driving Growth
Edward Jones analyst John Boylan kept his buy rating on Zoetis stock. He noted competition is looming for Zoetis' dermatological offerings.
"However, we remain encouraged by Zoetis' strong new product pipeline, which includes the potential for a longer-acting version of the new pain medicine for pets and a kidney drug for pets that is largely an unmet clinical need," he said in a report. "Seeing this unfold will take time."
Long term, he expects growth to be driven by new product launches and higher spending per pet. While the livestock segment should benefit from higher protein consumption worldwide.
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Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
