ZTS Q1 Earnings Call: Guidance Raised as Platform Products Drive Momentum Amid Competitive Pressures

Animal health company Zoetis (NYSE:ZTS) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 1.4% year on year to $2.22 billion. The company’s full-year revenue guidance of $9.5 billion at the midpoint came in 1.8% above analysts’ estimates. Its non-GAAP profit of $1.48 per share was 5.8% above analysts’ consensus estimates.

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StockStory’s Take

Zoetis’s first quarter results reflected momentum in both companion animal and livestock portfolios, underpinned by continued demand for its flagship product franchises despite increased competition and shifting consumer trends. CEO Kristin Peck pointed to the company’s strong international performance and expansion of the Simparica parasiticide and key dermatology products, noting, “Advances in diagnostics are helping unlock opportunity, enabling broader access, earlier intervention and better outcomes.” Management also acknowledged the slower-than-expected ramp in osteoarthritis (OA) pain therapies but highlighted the long-term market potential and efforts to accelerate adoption through education and real-world data initiatives.

Looking ahead, Zoetis’s raised full-year revenue and profit guidance stem from confidence in its diversified portfolio and global reach, as well as ongoing investments in innovation and customer engagement. CFO Wetteny Joseph emphasized the company’s ability to navigate tariff headwinds and currency fluctuations, stating, “Given our supply chain as broad as it is, that gives us lots of mitigation opportunities.” Management maintained its expectation for double-digit growth in its three core franchises and reiterated focus on operational agility amid a dynamic regulatory and macroeconomic environment.

Key Insights from Management’s Remarks

Zoetis’s leadership attributed the quarter’s performance primarily to robust product demand, international expansion, and operational discipline. The following themes were highlighted as central to recent business outcomes and future positioning:

• International growth leads results: Double-digit operational growth in Zoetis’s international segment was driven by strong demand for companion animal products, particularly Simparica and key dermatology lines, as well as solid livestock sales in Asia, Latin America, and Europe.
• Simparica franchise expansion: The Simparica line of parasiticides achieved notable US and international growth, benefiting from a first-mover advantage and retail channel expansion, including partnerships with online retailers. The recent US label expansion to include flea tapeworm protection was cited as an incremental but not transformative differentiator.
• Dermatology franchise resilience: Key dermatology products, Apoquel and Cytopoint, continued to grow, aided by the shift to chewable formulations and high satisfaction rates among veterinarians and pet owners. Management expects new competitors but believes entrenched market presence and a broad portfolio position Zoetis to defend share.
• OA pain therapies face gradual adoption: The Librela and Solensia products for osteoarthritis in pets delivered double-digit growth but adoption was slower than initially forecast, with management attributing this to consumer caution on chronic care spending and the need for continued education. Efforts to expand use to moderate cases and investments in real-world data are underway.
• Tariff and supply chain mitigation: Management discussed existing and potential tariff impacts, emphasizing a diversified manufacturing base—60% US-based—and extensive mitigation options across geographies and product categories to manage evolving trade policies.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on continued expansion of core product franchises, operational resilience, and strategic mitigation of external headwinds. The primary themes shaping forward guidance are outlined below:

• Core franchise growth: Zoetis expects sustained double-digit growth from its Simparica, key dermatology, and OA pain therapy franchises, driven by new product claims, increased compliance, and expanded market access, particularly outside the US.
• Channel diversification and consumer trends: Retail and alternative sales channels, including online and home delivery, are gaining share, supporting compliance and customer retention. Management believes these trends will offset some pressure from cautious consumer spending on chronic pet conditions.
• Tariff and regulatory uncertainty: While enacted tariffs have been incorporated into current guidance, management noted ongoing uncertainty around future trade measures, as well as evolving regulatory environments that could impact product approvals or market access. The company’s global manufacturing footprint is seen as a key risk mitigator.

Top Analyst Questions

• Erin Wright (Morgan Stanley): Asked about the outlook and adoption ramp for Librela after recent label changes and the impact of tariffs on guidance; management reiterated confidence in long-term OA pain market growth and outlined ongoing mitigation strategies for enacted tariffs.
• Michael Ryskin (Bank of America): Sought clarity on competitive pressures in parasiticides and dermatology; executives cited first-mover advantages and high satisfaction rates, noting that new entrants are expanding the overall market.
• Jon Block (Stifel): Questioned the drivers behind the EPS guidance increase and the near-term growth trajectory for Librela; CFO Wetteny Joseph attributed the EPS lift mainly to favorable foreign exchange and specified that tariff headwinds are now included in outlook.
• David Westenberg (Piper Sandler): Inquired about the impact of Amazon’s entry into pet medication retail and possible FDA delays; management noted continued growth in alternative channels and stated that no regulatory slowdowns have been observed so far.
• Brandon Vazquez (William Blair): Asked about compliance trends in light of changing consumer sentiment and for detail on price and volume expectations; leadership acknowledged more cautious spending on chronic treatments but highlighted the portfolio’s resilience and consistent price/volume mix.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) adoption rates for OA pain therapies, especially the impact of new educational and real-world evidence initiatives; (2) the competitive dynamics in parasiticides and dermatology as new market entrants arrive; and (3) the effectiveness of Zoetis’s tariff mitigation strategies as the trade policy environment evolves. Progress on these fronts will help determine whether the company maintains its growth trajectory.

Zoetis currently trades at a forward P/E ratio of 26.4×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.

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