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Zoetis Inc. (ZTS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered $2.22B revenue (+1% reported, +9% organic operational) and adjusted EPS of $1.48; both exceeded S&P Global consensus as FX headwinds were offset by strong companion animal demand . Revenue beat: $2.22B vs $2.19B*; EPS beat: $1.48 vs $1.40*.
  • Guidance raised: FY25 revenue to $9.425–$9.575B (maintains 6–8% organic operational growth), adjusted EPS to $6.20–$6.30; adjusted net income organic growth trimmed to 5–7% to reflect enacted tariffs .
  • Growth engines: Simparica franchise, key dermatology (Apoquel/Cytopoint), and OA pain mAbs (Librela/Solensia) delivered double‑digit operational growth; U.S. and International segments posted 6% and 11% organic operational revenue growth, respectively .
  • Near‑term narrative drivers: tariff policy (net ~$20M headwind embedded), competitive entrants in parasiticides/derm, accelerating alternative channels (retail/home delivery, Amazon), and OA adoption cadence; management emphasized agility and mitigation options .
  • Capital returns continue: dividend declared for Q3 2025 ($0.50/share) and ongoing buybacks underpin EPS trajectory, though guidance excludes future repurchase effects .

What Went Well and What Went Wrong

What Went Well

  • Companion animal strength: $1.546B CA revenue (+9% organic operational), led by Simparica Trio, Apoquel/Cytopoint, and OA mAbs; International CA +10% operational . “Our innovative companion animal portfolio grew 9% operationally” — CFO Wetteny Joseph .
  • Margin quality and mix: adjusted cost of sales 27.9% (implying ~72.1% adjusted gross margin), aided by FX tailwind and favorable mix; gross margin up 140 bps YoY .
  • Guidance uplift: adjusted EPS raised to $6.20–$6.30 (from $6.00–$6.10) and revenue range increased, primarily on FX; target double‑digit growth across three key franchises in 2025 reiterated . “We expect these combined innovative franchises will grow double digits in 2025” — CFO .

What Went Wrong

  • Livestock reported decline (-10% YoY) from MFA divestiture and FX; organic operational livestock +7% masks FX/divestiture drag . U.S. livestock -21% reported, -2% organic operational .
  • OA adoption cadence: U.S. OA mAbs growing, but uptake described as “more gradual than initially expected,” requiring incremental education, real‑world evidence, and DTC campaigns to accelerate market penetration .
  • Tariff headwinds and cost trajectory: enacted tariffs embedded in FY25 guide (lowering adjusted net income growth to 5–7%); management flagged higher manufacturing costs and FX offsets to margins in the near term .

Financial Results

Consolidated Financials vs Prior Periods and Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$2,388 $2,317 $2,220
GAAP Diluted EPS ($)$1.50 $1.29 $1.41
Adjusted Diluted EPS ($)$1.58 $1.40 $1.48
Adjusted Cost of Sales as % of Revenue29.3% 30.5% 27.9%
Net Income ($USD Millions)$682 $581 $631
Adjusted Net Income ($USD Millions)$716 $632 $662

Actuals vs S&P Global Consensus (Q1 2025)

MetricActualConsensusSurprise
Revenue ($USD Millions)$2,220 $2,192.9*+$27.1M / +1.2%*
Adjusted Diluted EPS ($)$1.48 $1.40*+$0.08 / +5.8%*
EBITDA ($USD Millions)$965.0*$961.5*+$3.5M / +0.4%*

Values retrieved from S&P Global.*

Segment and Category Breakdown

CategoryQ3 2024Q4 2024Q1 2025
Companion Animal Revenue ($USD Millions)$1,609 $1,570 $1,546
Livestock Revenue ($USD Millions)$758 $726 $645
U.S. Revenue ($USD Millions)$1,346 $1,257 $1,183
International Revenue ($USD Millions)$1,021 $1,039 $1,008

KPIs (Q1 2025)

KPIQ1 2025
Simparica Franchise Global Revenue$367M; +19% operational
Key Dermatology Global Revenue (Apoquel/Cytopoint)$387M; +10% operational
OA Pain mAbs (Librela/Solensia) Global Revenue$147M; +15% operational
U.S. Simparica Franchise Revenue$260M; +17% YoY
International Simparica Franchise Revenue$106M; +23% operational

Guidance Changes

MetricPeriodPrevious Guidance (Feb 13, 2025)Current Guidance (May 6, 2025)Change
Revenue ($USD Billions)FY 2025$9.225–$9.375 $9.425–$9.575 Raised
Organic Operational Revenue GrowthFY 20256%–8% 6%–8% Maintained
Adjusted Net Income ($USD Billions)FY 2025$2.700–$2.750 $2.775–$2.825 Raised
Organic Operational Adj. Net Income GrowthFY 20256%–8% 5%–7% Lowered (tariffs)
Adjusted Diluted EPS ($)FY 2025$6.00–$6.10 $6.20–$6.30 Raised
Reported Diluted EPS ($)FY 2025$5.70–$5.80 $5.85–$5.95 Raised
Adjusted Cost of Sales (% of Revenue)FY 2025~28.0% ~28.5% Raised
Adjusted SG&A ($USD Billions)FY 2025$2.300–$2.350 $2.340–$2.390 Raised
Adjusted R&D ($USD Billions)FY 2025$0.680–$0.690 $0.690–$0.700 Raised
Adjusted Interest & Other ($USD Millions)FY 2025~200 ~180 Lowered
Effective Tax Rate (Adjusted)FY 2025~21% ~21% Maintained
Certain Significant Items + A&D Costs ($USD Millions)FY 2025~30 ~45 Raised

Management attributed revenue and EPS raises primarily to FX, while trimming adjusted net income organic growth due to enacted tariffs .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
OA pain mAbs adoptionBlockbuster launch; U.S. Librela $201M FY; international OA mAbs +34% operational; targeting moderate cases; non‑linear adoption expected Global OA mAbs $147M (+15% op.); ~25M doses distributed; U.S. growth continued, but adoption more gradual than expected; heavier focus on education/DTC Still expanding; cadence slower near term; foundation strengthens
Parasiticides (triple combo)Simparica Trio #1 in U.S.; market growing ~40%; puppies ~50% on triple; sticky autoship channel Simparica global $367M (+19% op.); U.S. +17% on $260M; international +23% op.; label add for flea tapeworm prevention Durable tailwind; competition broadens category
Dermatology (Apoquel/Cytopoint)FY growth +17% op.; balanced demand; chewable conversion (U.S. ~31%; Europe ~50%); alt channels drive compliance Q1 key derm $387M (+10% op.); international +15% op.; Europe chewable doses ~57%; vets >90% satisfaction Growth resilient; prepare for competitor entries
Alternative channelsRetail/home delivery ~20% of U.S. pet care; economics neutral to positive; autoship boosts compliance Retail +40% YoY in Q1; Amazon adds choice; >40% of Apoquel/Simparica Trio volume via retail Mix shift ongoing; supports compliance/stickiness
Tariffs/macro/FXFY25 initial guide excluded tariffs; FX headwinds ($250M revenue, $50M adj NI) under late‑Jan rates Enacted tariffs now reflected (net ~$20M headwind); FX improvement raised guide; mitigation via footprint flexibility Policy watch; manageable with mitigation
Regulatory/pipelineExpect ≥1 major approval annually; CKD TAM $3–4B, oncology $1.2–1.7B No slowdowns at FDA/USDA; label updates (Librela, Simparica Trio) Pipeline cadence intact; approvals support long‑term TAM growth

Management Commentary

  • “By staying laser‑focused on delivering for our customers, our colleagues drove strong 9% organic operational revenue growth and grew adjusted net income 6% on an organic operational basis.” — CEO Kristin Peck .
  • “Our organic operational growth was driven by 4% price and 5% volume.” — CFO Wetteny Joseph .
  • “We now expect adjusted diluted EPS to be in the range of $6.20 to $6.30… primarily due to favorable foreign exchange… slightly offset by enacted tariffs.” — CFO .
  • “To accelerate adoption [of OA mAbs]… we are expanding medical education… leveraging post‑launch studies… targeted direct‑to‑consumer efforts.” — CEO .

Q&A Highlights

  • Librela trajectory and label change: Management reiterated strong vet satisfaction, expanding education/DTC, and focus on moderate cases; U.S. Librela grew 17% with ~$47M revenue, Solensia $18M (+7%) in Q1; label provides real‑world AE clarity without contraindications/warnings/precautions .
  • Tariffs: Enacted tariffs (APIs for certain livestock, diagnostics, accessories) reflected; net ~$20M headwind after mitigations; exposure more from retaliatory tariffs; 60% manufacturing in U.S. gives flexibility .
  • Competition: Management expects short‑term promotional impacts from new entrants but emphasizes large under‑treated markets and first‑mover advantages; three major franchises guided to double‑digit growth for FY25 .
  • Alternative channels and Amazon: Retail/home delivery growth supports compliance/stickiness; economics neutral‑to‑positive; >40% of Apoquel and Simparica Trio through retail .
  • Price/volume mix: Q1 organic operational +9% split into +4% price and +5% volume; rest of year expected similar mix, with livestock normalizing to industry growth .

Estimates Context

  • Q1 2025 beats: Revenue $2.22B vs $2.19B*; adjusted EPS $1.48 vs $1.40*; EBITDA $965M vs $962M* .
  • Forward quarters (selected): Consensus EPS $1.61* (Q2 2025), $1.62* (Q3 2025); Revenue $2.41B* (Q2 2025), $2.41B* (Q3 2025). Actuals subsequently printed above estimates in Q2 and were in line/slightly below in Q3 as reported later*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad‑based growth continues; Companion Animal momentum across Simparica, derm, and OA mAbs offsets FX/divestiture headwinds, with International organic operational growth +11% .
  • Guidance raised on FX; enacted tariffs reduce adjusted net income organic growth to 5–7%, but mitigation levers and U.S. manufacturing footprint support resilience .
  • Alternative channels are a structural tailwind: autoship/retail lift compliance and lifetime value, enhancing category stickiness amid competition .
  • OA mAbs remain a multi‑year expansion story; near‑term adoption cadence slower, but education/DTC and upcoming long‑acting formulations are catalysts .
  • Dermatology franchise well‑positioned with chewable conversion and high satisfaction; competitor entries likely to expand category rather than displace leadership .
  • Watch policy and FX: Tariff outcomes and FX shifts can swing reported results; current guide embeds enacted tariffs and late‑April FX .
  • Capital returns support EPS; dividend declared for Q3 2025 and ongoing buybacks (guide excludes future repurchase effects) .

Additional Q1 2025 Press Releases and Approvals

  • Simparica Trio U.S. label gained prevention of flea tapeworm; Revolution Plus received UK claim extension; Avian Influenza Vaccine conditional license in U.S./Canada; Poulvac Procerta approvals in EU/Brazil .
  • Zoetis declared Q3 2025 dividend of $0.50/share .

Notes on non‑GAAP: Adjusted results exclude purchase accounting adjustments, acquisition/divestiture‑related costs, and certain significant items; reconciliations provided in the 8‑K press release .