Zoetis (ZTS) Falls Following Q3 Disappointment and Librela Demand Weakness

Impax Asset Management's "Impax US Sustainable Economy Fund" released its Q4 2025 investor letter. A copy of the letter can be downloaded here. The fund reported that equity markets remained volatile during the quarter amid concerns over elevated valuations and financing for large-scale data center investments, although the portfolio modestly outperformed the Russell 1000 benchmark on the back of sustainability tilts and stock-specific gains, particularly within Health Care and Financials. On an annual basis, the Fund’s Institutional Class delivered a total return of 16.00% in 2025, compared to 17.37% for the Russell 1000, reflecting the impact of sector allocation and company-level developments such as gains in pharmaceutical and payment processing holdings and weakness in certain Consumer Staples names. Management noted that performance was influenced more by changing market leadership than macroeconomic deterioration, while maintaining a cautiously optimistic outlook supported by falling interest rates, resilient corporate earnings, and continued investment in structurally advantaged businesses positioned to benefit from the transition toward a more sustainable economy. In addition, please check the Fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Impax US Sustainable Economy Fund highlighted stocks like Zoetis Inc. (NYSE:ZTS). Zoetis Inc. (NYSE:ZTS) develops medicines and vaccines for livestock and companion animals, supported by a broad product pipeline aimed at long-term growth across global veterinary markets. The one-month return of Zoetis Inc. (NYSE:ZTS) was 0.90% while its shares traded between $115.25 and $177.00 over the last 52 weeks. On February 17, 2026, Zoetis Inc. (NYSE:ZTS) stock closed at approximately $126.56 per share, with a market capitalization of about $55.33 billion.

Impax US Sustainable Economy Fund stated the following regarding Zoetis Inc. (NYSE:ZTS) in its Q4 2025 investor letter:

"Zoetis Inc. (NYSE:ZTS) (Health Care, Pharmaceuticals) is held due to its attractive sustainability opportunity profile, as well as its strong governance profile. There was some disappointment in their Q3 earnings update in November. Zoetis has a full pipeline of new products to launch, but there is some time yet until these products can hit the market and accelerate revenue growth (2027 onwards). In the meantime, they face competition from others to some of their established franchises. Key canine arthritis pain product Librela continues to face side-effect perception issues and declined by more than expected in Q3, leading to disappointment in the quarter."

Zoetis Inc. (NYSE:ZTS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held Zoetis Inc. (NYSE:ZTS) at the end of the third quarter, which was 75 in the previous quarter. While we acknowledge the risk and potential of Zoetis Inc. (NYSE: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're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Zoetis Inc. (NYSE:ZTS) and shared the list of cheap pharmaceutical stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.