Zoetis Inc . (NYSE:ZTS), a leading global animal health company, has reported a triumphant second quarter of 2024, with significant growth in both revenue and adjusted net income. The company's operational revenue saw an 11% increase, while adjusted net income experienced an 18% operational rise.
This positive outcome was fueled by the strong performance of its innovative products in the companion animal and livestock sectors. Zoetis has confidently increased its full-year guidance and has announced a substantial $6 billion share repurchase program to support its ongoing growth.
Key Takeaways
- Zoetis achieved 11% operational revenue growth and 18% operational growth in adjusted net income.
- Strong demand for its osteoarthritis pain franchise contributed to this success, with Librela and Solensia seeing substantial operational revenue growth.
- The company's dermatology franchise also reported robust growth.
- Zoetis has raised its revenue and adjusted net income guidance for 2024.
- A new $6 billion share repurchase program has been announced, following a record $533 million in share repurchases.
- The company remains committed to growing faster than the market and through competition.
Company Outlook
- Zoetis raised its 2024 revenue guidance to between $9.1 billion and $9.25 billion.
- Adjusted net income is expected to be in the range of $2.64 billion to $2.69 billion.
- The company is dedicated to growing adjusted net income faster than revenue.
Bearish Highlights
- There were no specific details provided on vet visits or livestock growth outlook.
Bullish Highlights
- Zoetis's US revenue grew by 12%, with the companion animal sector growing by 13% and livestock by 11%.
- International revenue grew by 4% on a reported basis and 10% excluding foreign exchange impact.
- The company sees significant long-term opportunities in the dermatology market.
Misses
- The company did not provide detailed international information on vet visits.
- There are no specific plans or offerings related to international vet visits to share.
Q&A Highlights
- Discussions are ongoing with the FDA regarding possible label changes for Librela.
- The company expressed confidence in the safety and efficacy of their products despite a competitor's product receiving a black box warning.
- Zoetis believes their decision to stop an experimental compound was sound and lawful, amidst an EU Commission investigation.
Zoetis's financial results for the second quarter of 2024 reflect a company that is not only performing well but is also poised for future growth. The growth in their osteoarthritis pain and dermatology franchises has been particularly noteworthy, with substantial operational revenue increases. The company's strategic market development efforts and aggressive investment in advertising have contributed to this success, as evidenced by high reorder rates and record penetration in veterinary clinics.
The company's diagnostics business also showed strong volume growth and robust pricing, indicating the potential for continued success. The 20% growth in the fish portfolio and the performance of wellness-dependent products like vaccines further underscore the company's solid performance.
Zoetis's confidence is also apparent in its financial outlook, with raised guidance for the year and a significant share repurchase program. The company's diverse portfolio and innovative approach to animal health care position it well to capitalize on market opportunities and continue its growth trajectory.
InvestingPro Insights
Zoetis Inc. (ZTS) continues to demonstrate financial robustness and strategic acumen in the animal health sector. Reflecting on the latest financial data, here are some insights from InvestingPro to consider:
InvestingPro Data highlights Zoetis's substantial market capitalization of $84.41 billion, signaling strong investor confidence. The company's Price to Earnings (P/E) ratio stands at 35.62, which, while high, may be justified by its consistent performance and growth prospects. Notably, the company has achieved a gross profit margin of 70.08% over the last twelve months as of Q1 2024, showcasing its ability to maintain profitability amidst market challenges.
Two InvestingPro Tips that stand out for Zoetis are its perfect Piotroski Score of 9, indicating top-notch financial health, and the fact that management has been aggressively buying back shares, a move that often reflects leadership's belief in the company's value and future prospects. Furthermore, the company has raised its dividend for 11 consecutive years, which is a testament to its commitment to returning value to shareholders.
For those interested in deeper analysis, there are over 13 additional InvestingPro Tips available at InvestingPro Zoetis order. So clearly, we talked about our excitement, quite frankly around still unmet need out there in terms of undertreated and untreated that we are targeting. We got this competition because we believe on offense here in terms of growing -- expanding use of our products is the best move. We got less of the competition. But clearly, it will position us well versus a product that has a black box label.
Kristin Peck: And the only thing I'd add there is I think what's really exciting about Apoquel is that you don't have to trade off safety and efficacy there. It can be used across all durations of therapy, both acute seasonal and chronic I think the chewable really provides differentiation, especially at the consumer level. You don't have to worry about vaccine status, and it works very, very quickly. So I think that's what also gives us optimism and our potential to continue to grow this franchise.
Operator: Thank you. We'll take our next question from Navann Ty with BNP Paribas (OTC:BNPQY). Please go ahead.
Navann Ty: Hi, good morning. Thanks for taking my question. Just had one on Librela. If you had any updated thoughts on the transition to the moderate population, as well as the antitrust investigation in Europe. And then second, on vet visits, and I know that you are not as sensitive as other players, but if you have any outlook for that visit for the full year and next year? Thank you.
Kristin Peck: Sure. First on your question on the EU Commission investigation. It actually has to do with an experimental compound that was part of the Nexvet acquisition, which was about seven years ago. We continue to believe our decision to stop the experimental compound was sound, rigorous and lawful, and we're confident the concerns will be unfounded when they finish their investigation with regards to that. You were asking me how we're doing in international with regards to Librela. Right now, about 65% of the cases are now mild to moderate, which we think is significant progress, this has been a big focus of ours, as we've mentioned on the previous calls. And with regards to your last point, I think on vet visits, we don't really have really good detailed information internationally on vet visits -- so there's not great information. It ranges by market to market, and there's not great sources. So I don't have any specifics I can share there.
Operator: Thank you. We'll take our next question from Thomas DeBourcy with Nephron Research. Please go ahead.
Tom DeBourcy: Hello. Thanks for taking the question. Just I guess, Livestock, I know maybe not top against a lot. But even excluding fish, your cattle poultry swine growth was pretty strong in the quarter. And I was just wondering, the last couple of years have been difficult for livestock market with inflation and other pressures. Just whether you see maybe a more sustainable mid or high single-digit growth in that market. I know kind of there is MFAs going get it out there, but just otherwise, whether the market may be improving.
Wetteny Joseph: Yes. So look, great. We saw 9% growth in our livestock portfolio. As you've said continuously, livestock tends to grow the market, somewhere between 2% and 4%. Typically, -- this year, we are seeing increased price, particularly in those hyperinflationary markets like Argentina, for example. And so we would expect livestock as a market to grow towards the higher end of that range. And we believe we will follow that range as well. If you look at what we would expect in our results. I think when you see high single-digit growth rates like this, sometimes it's a comp for example, in the US, ceftiofur had an easier comp versus prior year. So you'll see an uptick in that. But overall, we expect livestock to be in that 2% to 4% range, perhaps a touch above that in this current environment given the pricing environment on those hyperinflation in our markets.
Operator: And there are no further questions at this time. I'll turn the call back to the speakers for any closing remarks.
Kristin Peck: Thank you. Thanks, everybody, for joining the call today and for your questions. Our ability to seamlessly integrate innovation and execution resulted in what I believe is an outstanding second quarter and first half of 2024, it led us to raise our guidance. And we are very excited about the continued momentum for the rest of the year. I think what we've clearly demonstrated is our ability to generate groundbreaking ideas and translate those into tangible results. We are laser-focused on our strategy to ensure we remain at the forefront of the industry. I believe our diverse and durable portfolio of trusted and best-in-class products positions us well to capitalize on the emerging opportunities and to really redefine how animals are cared for, for the long term. And finally, I want to express my heartfelt gratitude to all of our dedicated colleagues across the globe. We recently celebrated Purpose Months across our teams and geographies, highlighting how we bring our purpose to life every day with our customers, our communities and each other and their passion for nurturing the world in human time by advancing care for animals, is truly inspiring. Your hard work and commitment are the driving force behind our success. And I want to thank you for everything that you do. And I want to thank all of you for joining us today. Have a great day.
Operator: Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.
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