Zoetis Inc. (ZTS): A Bull Case Theory

We came across a bullish thesis on Zoetis Inc. on r/valueinvesting by ahlornjtvn139. In this article, we will summarize the bulls’ thesis on ZTS. Zoetis Inc.'s share was trading at $121.93 as of January 28th. ZTS’s trailing and forward P/E were 20.53 and 18.55 respectively according to Yahoo Finance. A

Zoetis Inc. engages in the discovery, development, manufacture, and commercialization of animal health medicines, vaccines, diagnostic products and services, biodevices, genetic tests, and precision animal health products in the United States and internationally. ZTS recently reported its Q3 earnings, delivering mixed but ultimately reassuring results that suggest the market reaction may be overdone.

The company posted Q3 revenue of $2.4 billion, up roughly 1% year-over-year, with organic operational growth closer to 4%, partly offset by unfavorable foreign exchange and other headwinds. Adjusted net income came in at $754 million, translating to EPS of $1.70, which exceeded consensus expectations by approximately 9%. Management reaffirmed full-year guidance, projecting revenue of $9.4–$9.475 billion, implying solid 5.5–6.5% growth for the year despite near-term noise.

That said, some deceleration is evident beneath the surface. While Zoetis has beaten EPS expectations for four consecutive quarters, earnings growth slowed meaningfully, from 4% year-over-year in Q2 2025 to just 1% in Q3. Concerns around growth momentum contributed to recent share price weakness. Balance sheet risk, however, appears manageable. The company carries net debt of $4.59 billion, but interest coverage remains very strong, with Q3 EBIT covering interest expense by more than 15x. With an estimated WACC of around 9%, leverage does not appear to be a binding constraint on value.

From a valuation perspective, applying a 9% discount rate, a five-year growth assumption of 2%, 1% terminal growth, and a 21% tax rate yields an intrinsic value of roughly $145 per share, representing about 20% upside from mid $120s level. Importantly, the stock had been trading close to fair value prior to the selloff, reinforcing the view that the decline reflects overreaction rather than fundamental impairment.

With a strong late-stage pipeline, including Lenivia and Portela expected around Q2 2026, and steady mid-single-digit growth outlook, ZTS appears well positioned. The average analyst price target of ~$180 further underscores the attractive risk-reward, making the stock one to closely monitor or selectively accumulate.

Previously, we covered a bullish thesis on Zoetis Inc. (ZTS) by Best Anchor Stocks in December 2024, which highlighted accelerating growth, strong franchise momentum, and the expansion of its osteoarthritis monoclonal antibody portfolio. ZTS’s stock price has depreciated by approximately 25.96% since our coverage due to concerns around slowing earnings growth and market overreaction. ahlornjtvn139 shares a similar thesis but emphasizes valuation support, balance sheet strength, and pipeline-driven upside.

Zoetis Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held ZTS at the end of the third quarter which was 75 in the previous quarter. While we acknowledge the risk and potential of ZTS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZTS and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.