Zoetis Inc. (ZTS) Q4 2024 Earnings Summary

Executive Summary

Q4 2024 revenue was $2.317B (+5% YoY, +6% operational) and GAAP diluted EPS was $1.29; adjusted diluted EPS was $1.40 (+13% YoY). Organic operational revenue growth excluding the divested MFA and certain water-soluble products was 9% in the quarter .
Sequentially, Q4 showed normal seasonal deceleration vs Q3: revenue fell ~3% ($2.317B vs $2.388B) and adjusted EPS fell ~11% ($1.40 vs $1.58), reflecting Q4 2023 clinic stocking comps and the MFA divestiture .
Management introduced FY 2025 guidance: revenue $9.225–$9.375B (organic operational growth 6–8%), adjusted diluted EPS $6.00–$6.10, adjusted net income $2.7–$2.75B; adjusted cost of sales ~28%, SG&A $2.300–$2.350B, R&D $680–$690M, tax rate ~21% .
Key growth engines remained robust: Q4 Simparica franchise $324M (+21% op), key dermatology $417M (+11% op), OA pain mAbs $150M (+20% op); U.S. Librela delivered $53M in Q4 (+21%) and >1.2M patients to date .
Catalysts into 2025: double‑digit growth expected across Simparica, dermatology, OA franchises; competitive entries mostly H2; dividend increased 16% to $0.50 for Q1 2025; organic operational metric adoption clarifies underlying momentum .

What Went Well and What Went Wrong

What Went Well

Companion animal growth drivers performed strongly: Simparica franchise $324M (+21% op in Q4), dermatology $417M (+11% op), OA pain mAbs $150M (+20% op), demonstrating breadth and resilience .
CEO highlighted durable demand and above‑market trajectory: “drivers of our 2024 success are sustainable... positioning us for continued above‑market growth” .
Librela U.S. ramp remains exceptional; CFO: “Librela… reached blockbuster status… the most successful launch in animal health history” with pain‑related vet visits +15% in Q4 .

What Went Wrong

Reported U.S. livestock declined 8% in Q4 due to the MFA divestiture; management will continue to report organic operational comparisons to normalize the impact .
FX headwinds offset margin gains; CFO quantified ~50 bps gross margin headwind expected in 2025 .
China swine and companion animal volumes remained a headwind in 2024, though management expects normalization into 2025 .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Billions)	$2.361	$2.388	$2.317
GAAP Diluted EPS ($)	$1.37	$1.50	$1.29
Adjusted Diluted EPS ($)	$1.56	$1.58	$1.40
Adjusted Cost of Sales (% of revenue)	28.3%	29.3%	30.5%

Note: Analyst consensus estimates via S&P Global were unavailable due to data access limits; estimate comparisons are not provided.

Segment breakdown (Q4 2024):

Segment	Revenue ($USD Millions)
U.S. Companion Animal	$1,008
U.S. Livestock	$249
Total U.S.	$1,257
International Companion Animal	$562
International Livestock	$477
Total International	$1,039
Total Companion Animal	$1,570
Total Livestock	$726
Total Revenue	$2,317

Q4 KPIs (selected):

KPI	Q4 2024
Simparica Franchise Revenue	$324M
Key Dermatology Revenue	$417M
OA Pain mAbs Revenue (Librela + Solensia)	$150M
Global Companion Animal Diagnostics Revenue	$96M
U.S. Librela Revenue	$53M

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($)	FY 2025	—	$9.225–$9.375B	Introduced
Organic Operational Revenue Growth (%)	FY 2025	—	6%–8%	Introduced
Adjusted Cost of Sales (% of revenue)	FY 2025	—	~28.0%	Introduced
Adjusted SG&A ($)	FY 2025	—	$2.300–$2.350B	Introduced
Adjusted R&D ($)	FY 2025	—	$680–$690M	Introduced
Adjusted Interest & Other ($)	FY 2025	—	~ $200M	Introduced
Adjusted Effective Tax Rate (%)	FY 2025	—	~21%	Introduced
Adjusted Diluted EPS ($)	FY 2025	—	$6.00–$6.10	Introduced
Reported Diluted EPS ($)	FY 2025	—	$5.70–$5.80	Introduced
Adjusted Net Income ($)	FY 2025	—	$2.700–$2.750B	Introduced
Certain Significant Items ($)	FY 2025	—	~ $30M	Introduced
Dividend per share	Q1 2025	$0.43 (2024 quarterly rate)	$0.50 (+16%)	Raised

Earnings Call Themes & Trends

Topic	Q2 2024 (prior two quarters)	Q3 2024 (prior quarter)	Q4 2024 (current)	Trend
Simparica/Triple combination	Trio $299M (Q2); 22% op growth; retail leadership; first‑mover advantage	Trio strong; puppies leading indicator; disciplined promotions	Franchise $324M (+21% op); >50% of U.S. puppies on triple; market to $4.5B by 2028	Positive; accelerating adoption
OA pain (Librela/Solensia)	Record penetration; reorder ~86–90%; building category	U.S. $73M in Q3; >1M dogs; non‑linear ramp	Q4 OA $150M; U.S. Librela $53M; >1.2M patients; label clarity; robust growth expected	Positive; expanding into moderate cases
Dermatology (Apoquel/Cytopoint)	18% op growth; chewable conversion; retail channel boosting compliance	17% growth; balanced between Apoquel and Cytopoint	$417M (+11% op); competition factored; double‑digit growth expected in 2025	Positive; category expansion despite competition
FX / Argentina	FX pressured gross margin; Argentina price tailwind, but net P&L impact negative	Price tailwind normalizing; China headwinds moderating in 2025	FX headwinds (~$250M revenue, ~$50M adj NI); ~50 bps GM headwind expected	Mixed; FX headwind persists
Supply chain / livestock	Ceftiofur supply timing benefit; fish vaccines strong	U.S. cattle volume; DRAXXIN timing	U.S. livestock organic +12% (excluding MFA); international livestock +6% op	Normalizing; ex‑MFA organic growth
Regulatory/legal	EU probe (legacy Nexvet compound); company confident	—	U.S. Librela label update; no contraindications/warnings/precautions	Clarified; supportive of adoption
Technology/AI	Diagnostics Vetscan Opticell (AI‑powered)	India Capability Center expansion	Continued omnichannel and DTC emphasis	Ongoing investment

Management Commentary

CEO: “We delivered double‑digit operational revenue growth of 11%… our companion animal and livestock portfolios saw strong operational revenue growth, 14% and 5%, respectively” .
CFO: “Excluding the impact of interest and taxes, we expect bottom line growth of 8% to 10% [in 2025]” .
CEO on Librela label: “There were no contraindications, no warnings and no precautions in that label… veterinarians have found that quite helpful” .
CFO on margins: “MFA divestiture is accretive… we are expecting price above the 2% to 3% historically, but below the 6% we did this year… FX is about 50 bps headwind at the gross margin level” .

Q&A Highlights

Competition and spend: Management factored multiple scenarios for derm and triple combo entries (mostly H2 2025), and will deploy targeted DTC/education spend to defend franchises; expects double‑digit growth across Simparica, derm, OA in 2025 .
Librela trajectory: Non‑linear ramp; continued expansion from severe to moderate cases; label update aligned with international labels supports adoption .
Pricing/volume mix: 2025 pricing above historical 2–3% but below 2024 levels; at low end of revenue range, price > volume; at high end, price/volume more balanced .
Livestock/FX: 2025 livestock organic growth expected in line with industry as Argentina tailwinds normalize; FX headwinds quantified in guidance .
Derm mix: Balanced growth across Apoquel and Cytopoint; ~40% of Apoquel volume now via alternative channels (retail/home delivery) .

Estimates Context

Wall Street consensus (EPS and revenue) for Q4 2024 via S&P Global was unavailable due to data access limits; therefore, comparisons to Street estimates are not provided.

Key Takeaways for Investors

Underlying momentum remains strong: Q4 organic operational revenue +9% despite MFA divestiture and tough stocking comps, with broad‑based strength across core franchises .
2025 setup is constructive: guidance implies 6–8% organic operational top‑line growth, adj EPS $6.00–$6.10, and 8–10% bottom‑line growth ex interest/taxes; FX is the key macro swing factor to monitor .
Competitive dynamics are manageable: entries largely expected in H2 2025; management plans targeted spend and highlights sticky categories (puppy share in triple combos, injectables in derm/OA) .
Mix shift supports margins: exit from MFAs and growth skew to companion animal are accretive to gross margin; watch FX and manufacturing cost pressures .
Retail/home delivery channel is a secular tailwind: boosts compliance and lifetime value, with Trio the top retail Rx and Apoquel #2; alternative channel share rising .
Dividend and buybacks signal confidence: Q1 2025 dividend lifted 16% to $0.50; $6B repurchase program authorized, with $1.9B repurchased in 2024 .
Near‑term catalysts: further Librela adoption into moderate cases post‑label clarity; continued triple‑combo penetration; derm category expansion despite competition; updates on pipeline (long‑acting, CKD, oncology) not in guidance .