Zoetis Inc. (ZTS) Q2 2025 Earnings Summary
Executive Summary
- Zoetis delivered a clean beat and raised FY25 guidance: Q2 revenue $2.46B (+4% YoY) and adjusted diluted EPS $1.76 (+13% YoY); EPS and revenue exceeded consensus and management lifted FY25 ranges for revenue and adjusted EPS, citing execution, price/volume balance and cost discipline .
- EPS beat of ~9% vs S&P Global consensus ($1.76 vs $1.61*) and revenue beat of ~2% ($2.46B vs $2.41B*); organic operational revenue growth was 8%, with price and volume each contributing ~4% .
- Guidance raised: FY25 revenue to $9.450–$9.600B (from $9.425–$9.575B) and adjusted EPS to $6.30–$6.40 (from $6.20–$6.30); adjusted cost of sales % trimmed and interest/other lowered; tax unchanged .
- Key drivers: Simparica Trio and dermatology remained strong; OA pain mAbs saw U.S. headwinds (Librela down 16% in U.S.), with management leaning into education and Phase 4 data; alternative channels reached ~22% of U.S. companion animal, supporting compliance and stickiness .
What Went Well and What Went Wrong
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What Went Well
- Broad-based growth: Organic operational revenue +8% and adjusted net income +10% in Q2; management emphasized balanced price/volume and durable growth across species/geographies .
- Simparica/Trio momentum: U.S. Simparica franchise +18% on $329M; Trio growth despite competition; puppy triple-combo adoption ~60% and alternative channels supporting compliance (mid-20% growth) .
- Margin execution and cost discipline: Adjusted cost of sales improved to 26.3% of revenue; CFO highlighted improving manufacturing cost trajectory and favorable mix; guidance lowered adjusted interest/other .
- Quote: “Zoetis delivered a strong broad-based performance… 8% organic operational revenue growth.” — CEO Kristin Peck .
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What Went Wrong
- OA pain mAbs in U.S.: Librela declined 16% to $45M; combined OA mAbs in U.S. down 12% to $62M; vet/pet-owner education and Phase 4 studies underway to address adoption barriers .
- U.S. Livestock headwinds: Reported -21% YoY due to MFA divestiture; organic -2% driven by timing of ceftiofur supply and Draxxin competition .
- Tariff environment: Slightly higher impact than May outlook but absorbable; uncertainty remains around future policy changes and exclusions .
- Analyst concerns: Near-term cadence risks in H2 from expected derm competitor launch and OA pain adoption timing; management kept double-digit growth outlook for key franchises .
Financial Results
Segment breakdown
KPIs and operating mix
Selected segment margins (reported)
Consensus vs actuals
Values with asterisk retrieved from S&P Global.
Guidance Changes
Other relevant press releases in/around Q2:
- Declared Q3 2025 dividend of $0.50 per share (paid Sep 3; record Jul 18) .
- Post-Q2: Priced $1.85B senior notes to refinance 2025 maturities (closed Aug 18) .
Earnings Call Themes & Trends
Management Commentary
- Strategy and execution: “Our consistent results across economic and competitive cycles reflect the strength of our innovation engine… and the discipline of our execution.” — CEO Kristin Peck .
- Mix and margins: “Adjusted gross margins of 73.7%… favorable impact of our MFA divestiture as well as benefits from price… partially offset by higher manufacturing costs… improving as we work through inventory.” — CFO Wetteny Joseph .
- OA pain approach: “We are actively advancing efforts to accelerate adoption… educating veterinarians and pet owners… phase four studies to reaffirm safety and efficacy.” — CEO Kristin Peck .
- Triple-combo trajectory: “We expect triple combinations to double by 2028… more entrants will create awareness… we remain well positioned as first mover.” — CFO Wetteny Joseph .
Q&A Highlights
- Parasiticides and derm competition: Management reiterated first-mover advantages and disciplined promotion; Trio and derm franchises continue double-digit growth despite entrants .
- Librela trajectory and timing: U.S. adoption impacted by safety perceptions; Phase 4 and education expected to support reacceleration with readouts starting Q4; long-term confidence maintained .
- Alternative channel expansion: Alt channels ~22% of U.S. companion animal; mid-20% growth; retail stocking tailwinds offset prior-year derm distribution stocking headwind .
- Tariffs: Slightly higher impact vs May; embedded into guidance; diverse U.S.-centric manufacturing footprint aids mitigation .
- Revenue cadence: Stronger first half vs second half given expected H2 competitive activity in derm; double-digit growth for key franchises reiterated .
Estimates Context
- Q2 2025 beat: Adjusted EPS $1.76 vs consensus $1.61*; revenue $2.46B vs $2.41B*, indicating upside on both lines .
- FY 2025: Guidance raised to revenue $9.45–$9.60B and adjusted EPS $6.30–$6.40 vs consensus $9.46B* and $6.34*, implying guidance brackets consensus with mild upside midpoint .
Values with asterisk retrieved from S&P Global.
Key Takeaways for Investors
- The quarter was de-risking: clear beat and guidance raise, with improved cost of sales and lowered interest/other, signaling margin resilience into H2 .
- Growth engine intact: Simparica Trio and dermatology remain core drivers; alternative channels elevate compliance and lifetime value, supporting durable growth .
- Watch OA pain trajectory: U.S. Librela softness is the main blemish; Phase 4 and education are near-term levers, while long-acting OA mAb provides a visible catalyst path .
- H2 setup: Expect some promotional noise as derm competitor launches; management has modeled scenarios and still targets double-digit growth across key franchises .
- Macro/tariffs manageable: Slightly higher tariff impact vs May but absorbed; diversified U.S manufacturing footprint reduces risk .
- Capital allocation: Dividend declared ($0.50) and subsequent notes offering to refinance 2025 maturities suggest balance-sheet discipline and ongoing buyback capacity per prior programs .
- Near-term trading: Beat-and-raise typically supports positive momentum; monitor OA pain narrative flow (study readouts, vet sentiment) and derm competitive promotions in Q4 for volatility inflections .