Zoetis Continues to Deliver More Bang Per Buck
The isolation brought by the pandemic-induced lockdowns has increased people’s reliance on their pets.
In the past months, stories have circulated around the country about the animal shelters being empty for the first time in recent history.
Aside from seeing this as a feel-good report, it can also be perceived as an investing opportunity. For businesses that specifically cater to these products and services, this phenomenon can easily translate into growing revenue.
One of the pet-related companies that benefited from it is Zoetis (ZTS).
Zoetis offers an extensive range of products that cater to both pets and even farm animals. Their list includes drugs, diagnostics, pesticides, and vaccines.
Originally, Zoetis was a subsidiary of biotechnology and healthcare giant Pfizer (PFE). It eventually broke away from its parent company and entered the stock market sometime in 2013.
For roughly seven years, Zoetis stock has impressively trounced the average market returns – and that momentum is projected to continue in the next five years.
In the second quarter of 2020, Zoetis reported $1.5 billion in revenue. This is flat compared to last year’s report, but it still surpassed the consensus Wall Street estimate of $1.36 billion.
In terms of net income, the company reported $377 million or $.079 for each share. This showed a modest increase from the $371 million or $0.77 per share it earned during the same period in 2019.
Despite the turbulent situation in the US, the market still served as one of the positive contributors in Zoetis’ second quarter.
The company recorded a 6% year over year jump in its revenue in the US, allowing it to reach $832 million. Unfortunately, revenue for its livestock products dropped by 18% year over year.
Sales for its companion-animal offerings also increased by 19%, with the climb largely attributed to the upsurge in demand for Zoetis’ growing Simparica brands.
In May, Zoetis lowered earnings expectations for 2020 due to the coronavirus pandemic.
However, Zoetis stock managed to exceed expectations. In fact, the animal healthcare stock is up by over 20% in the past three months.
Given its positive performance in the second quarter, Zoetis has increased its full-year 2020 guidance.
The company anticipates an annual revenue of $6.3 billion to $6.476 billion, which is a leap from its previous estimate of $5.95 billion to $6.25 billion.
Projections for its earnings per share is now in the range of $3.14 to $3.32 from the previous $2.80 to $3.07.
More importantly, Zoetis is looking into expanding its massive roster.
Since its most recent product Simparica Trio, which is a three-in-one preventive treatment for dogs, garnered much success in the market, the company is expected to release at least two new products before the year closes.
Aside from that, Zoetis may also expand into new markets within the animal healthcare sector.
One of the telltale signs is the company’s recent acquisitions, which include Performance Livestock Analytics, Platinum Performance, and other regional diagnostic laboratories.
In 2019, Zoetis forged a partnership with Colorado State University to study the livestock immune system. This could signify the company’s interest in another service, such as providing antibiotics to animals that are identified as sources of meat.
The demand for animal healthcare products and services has been consistently reliable, with the market estimated to reach $177.1 billion in 2027.
With the need for these goods spanning across the globe, companies that offer cater to these markets can expect a steady revenue stream and growth in the years to come.
Among the companies in this sector, Zoetis is the biggest with trailing 12-month revenues of roughly $6.3 billion and a market capitalization of $75.72 billion.
It prides itself on a notable profit margin of 25.4% and an impressive 63.6% return on equity. Adding these two metrics to the fact that the company has a 35.6% quarterly earnings growth year over year makes Zoetis a safe and long-term bet.
