Animal health company Zoetis (NYSE: ZTS) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 3% year on year to $2.39 billion. The company expects the full year’s revenue to be around $9.93 billion, close to analysts’ estimates. Its non-GAAP profit of $1.48 per share was 5.5% above analysts’ consensus estimates.

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StockStory’s Take

Zoetis’ fourth quarter results were met with a muted market reaction, as headwinds in the U.S. companion animal segment and margin pressures offset revenue growth. Management pointed to lingering economic challenges among U.S. pet owners, who became more price sensitive and reduced routine veterinary visits, while persistent competition in dermatology and parasiticides weighed on growth. CEO Kristin Peck noted, "We continue to see some economic pressure on Gen Z and millennial pet owners, which has contributed to a decline in therapeutic visits and doses."

Looking forward, Zoetis’ guidance incorporates expectations for moderating competitive pressure and gradual improvement in U.S. pet owner demand. Management believes new product launches, particularly long-acting pain therapies and expanded diagnostics, will drive growth as the year progresses. CFO Wetteny Joseph highlighted ongoing investments in innovation and commercial execution, stating, “We expect the Simparica franchise to lead the way into this 3% to 5% growth.” However, management acknowledged that recovery in volume will depend on both consumer behavior and the evolving competitive landscape.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to persistent competitive activity, evolving pet owner spending habits, and continued innovation across key franchises.

• U.S. pet owner price sensitivity: Management observed increased price sensitivity, especially among younger pet owners, which contributed to a decline in routine veterinary visits and impacted demand for some products in the companion animal segment.

• Competitive landscape intensifies: The company faced heightened promotional activity from competitors, particularly in dermatology and parasiticide markets, with management expecting these pressures to persist but moderate as new entrants shift focus post-launch.

• Simparica franchise momentum: Simparica and Simparica Trio continued to gain market share globally, benefiting from first-mover advantage in the triple combination space and broad adoption in both U.S. and international markets.

• Diagnostics growth: The companion animal diagnostics segment outperformed the broader market, fueled by AI-enabled product launches like Vetscan Optocell and expansion into new geographies through acquisitions such as Veterinary Pathology Group in the U.K. and Ireland.

• Operational adjustments and accounting changes: The acceleration of certain international sales due to accounting changes provided a temporary revenue lift in Q4, a trend management clarified will not recur in future quarters as fiscal alignment is implemented globally.

Drivers of Future Performance

Zoetis anticipates modest growth in 2026, underpinned by its diversified portfolio, innovation pipeline, and expectations for easing competitive and macroeconomic headwinds.

• Innovation pipeline and product launches: Management expects new long-acting pain therapies and diagnostic advancements to gradually accelerate revenue, with launches in Europe and Canada in 2026 and anticipated U.S. approval for Lanivia in 2027. These products aim to address unmet needs in osteoarthritis pain management and diagnostics.

• Competitive and pricing dynamics: Competitive pressures in dermatology and parasiticides are expected to persist but moderate throughout the year. Management projects price increases of 2% to 3%, with growth at the upper end of guidance dependent on stronger volume recovery.

• Macroeconomic and consumer trends: The guidance assumes a gradual improvement in U.S. pet owner financial conditions and stabilization in routine vet visits. Management is monitoring evolving clinic business models and consumer programs aimed at improving affordability and access.

Catalysts in Upcoming Quarters

In upcoming quarters, our analysts will focus on (1) the pace of recovery in U.S. companion animal volumes and any rebound in routine veterinary visits, (2) the ability of new product launches, especially in pain management and diagnostics, to gain traction, and (3) the extent to which competitive pressures in dermatology and parasiticides moderate. Additionally, we will monitor operational execution as Zoetis aligns its fiscal reporting globally.

Zoetis currently trades at $125.51, down from $128.67 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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