Animal health giant Zoetis fetched a fourth-quarter beat Tuesday and issued a strong 2023 sales outlook, sending ZTS stock to a six-month high.
The lion's share of strength came from Zoetis' pet segment, while livestock sales declined. Revenue from medicines for dogs, cats and horses climbed 10%, while sales from the livestock division tumbled 7%.
Overall, sales rose 4% to $2.04 billion, narrowly topping forecasts for $2 billion, according to FactSet. Adjusted earnings jumped 15% to $1.15 per share and met estimates. Edward Jones analyst John Boylan was encouraged by the continued strength in the animal-health division.
"There was some investor fear that ongoing worker shortages at vets and an uncertain economy might cause vet visits to slow and negatively impact Zoetis' sales and profits," he said in a note to clients. "This fear appeared misplaced, as we believe that younger pet owners are willing to spend more on their pets than earlier generations, and that worker shortages may have been less of a factor."
On the stock market today, ZTS stock surged 5.4% and closed at 171.90.
ZTS Stock: Livestock Remains Volatile
Companion animal sales came in at $1.3 billion, narrowly beating analyst forecasts for $1.28 billion. Livestock sales also topped broad estimates at $710 million. Analysts called for $699.3 million, according to FactSet. Boylan, though, called livestock sales "sluggish."
"But this can be a volatile and competitive market," he said. "The livestock market should eventually return to growth, assuming herd sizes increase as the global economy stabilizes."
He doesn't believe this view is reflected in ZTS stock.
For the year, Zoetis called for $8.575 billion to $8.725 billion in sales. The low end of the company's outlook came in above ZTS stock analyst calls for $8.56 billion. The company also expects adjusted income of $5.34-$5.44 per share. Analysts projected $5.40 per share, a penny above the midpoint of Zoetis' outlook.
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