ZTS Q3 Deep Dive: Flat Sales, Guidance Cut Amid Competitive and Market Pressures

Animal health company Zoetis (NYSE:ZTS) met Wall Streets revenue expectations in Q3 CY2025, but sales were flat year on year at $2.4 billion. On the other hand, the company’s full-year revenue guidance of $9.44 billion at the midpoint came in 0.8% below analysts’ estimates. Its non-GAAP profit of $1.70 per share was 4.8% above analysts’ consensus estimates.

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StockStory’s Take

Zoetis faced a challenging third quarter, with the market reacting negatively to results that showed flat year-on-year sales and a trim to full-year revenue guidance. Management attributed the muted performance primarily to subdued clinic visits in the U.S. companion animal segment and heightened promotional activity from competitors. CEO Kristin Peck noted, “Growth moderated this quarter driven by a strong year-over-year comp and macro factors, including vet clinic visits and promotional activity.” The company also pointed to social media-driven misperceptions affecting its osteoarthritis pain portfolio, especially Librela, and acknowledged that competitive launches in dermatology created additional headwinds.

Looking ahead, Zoetis’ updated guidance reflects ongoing caution about macroeconomic and competitive conditions affecting its key franchises. Management believes stabilization in the osteoarthritis pain product Librela and the anticipated launches of new long-acting pain medications could support a return to growth in 2026. CFO Wetteny Joseph explained that, “We are encouraged by recent trends showing signs of stabilization, supported by strong satisfaction among the majority of pet owners.” The company is also preparing for increased competition in dermatology and expects continued strength in its livestock business, underscoring a focus on pipeline innovation and geographic expansion to drive future performance.

Key Insights from Management’s Remarks

Management attributed quarterly performance to weaker U.S. clinic traffic, competitive pressures in dermatology, and a decline in osteoarthritis pain products, partially offset by growth in international and livestock segments.

• U.S. clinic traffic decline: Management reported a notable drop in therapeutic veterinary visits—a key driver of new patient starts—impacting both the companion animal and dermatology franchises, especially in the United States. This trend had a significant effect on volumes, with volume growth described as flat for the quarter.
• Competitive dermatology landscape: The company faced aggressive promotional activity from new entrants in the dermatology space, particularly in the U.S. and Europe, leading to modest share loss and increased pricing pressure. Management stated that most impact stemmed from launch-related discounts and sampling by competitors, and expects these effects to be temporary.
• Librela and OA pain challenges: The osteoarthritis pain management franchise, led by Librela, declined due to misperceptions amplified on social media and reduced new patient starts. Management is implementing a multipronged strategy—including increased education, independent Phase IV research, and targeted communication—to rebuild confidence and support product recovery.
• International and livestock growth offset: Robust double-digit growth in the livestock segment and continued expansion in international companion animal markets helped offset weaker U.S. performance. Livestock benefited from vaccine-led growth and broader protein demand, while international markets saw strong uptake of Simparica Trio and dermatology products.
• Leadership transition in R&D: Zoetis announced the retirement of Rob Polzer, Head of R&D, effective early 2026, with Kevin Esch set to take over. Management emphasized continuity in advancing the company’s innovation pipeline during this transition.

Drivers of Future Performance

Zoetis’ guidance for the coming quarters is shaped by ongoing competitive pressures, stabilization efforts in key products, and a focus on introducing pipeline innovations.

• Stabilization of OA pain portfolio: Management expects Librela to stabilize and return to growth in 2026, supported by new clinical research and expanded educational outreach to veterinarians. The upcoming launches of Lenivia and Portela, long-acting pain medications for dogs and cats, are anticipated to expand the osteoarthritis market and offset prior declines.
• Continued competition in dermatology: Competitive launches and aggressive discounting in the dermatology category are expected to persist into the next year. While management views these impacts as transitory, they acknowledge ongoing pricing and share pressures, especially as additional products enter the U.S. and European markets.
• Livestock and international momentum: The company projects continued strength in livestock, driven by increased protein demand, vaccine adoption, and expanding presence in emerging markets. International growth in companion animal products is expected to remain a key offset to domestic market softness.

Catalysts in Upcoming Quarters

In the next few quarters, our team will closely monitor (1) evidence of stabilization and recovery in the Librela osteoarthritis pain franchise, (2) the effectiveness of management’s educational and research initiatives to offset social media-driven misperceptions, and (3) competitive dynamics in dermatology as new products continue to launch. Progress on the launch preparations and regulatory approvals for Lenivia and Portela will also serve as important indicators for Zoetis’ ability to reinvigorate its companion animal growth engine.

Zoetis currently trades at $124.60, down from $144.46 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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