ZTS | Q2 2024
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Overview
Non-GAAP EPS of $1.56 beats by $0.08.
Revenue of $2.4B (+9.1% Y/Y) beats by $90M.
Takeaways
Zoetis delivered a strong financial performance in Q2 2024, posting $2.4 billion in revenue, an 8% increase on a reported basis, and an 11% operational increase. Adjusted net income reached $711 million, reflecting a 9% increase on a reported basis and 18% operational growth.
This performance was largely driven by Zoetis’s innovative companion animal portfolio. For the first time, Zoetis’s U.S. companion animal portfolio exceeded $1 billion in quarterly sales, with products like Librela, the Simparica franchise, and their dermatology offerings leading the charge.
In a further show of confidence, the company also set a record in share repurchases, buying back $533 million worth of shares while announcing a new $6 billion share repurchase program.
CEO Kristin Peck highlighted this financial success as she opened the earnings call, emphasizing that Zoetis's strong Q2 results were fueled by strong demand for its innovative products, market expansion, and the dedication of its purpose-driven workforce.
A cornerstone of Zoetis's success is its industry-leading investment in R&D, which has brought over 300 science-driven innovations to market, including three of the top five best-selling products in animal health: Apoquel, Simparica Trio, and Cytopoint.
The CEO pointed out that the animal health industry is both essential and resilient, providing a dynamic and growing market where Zoetis is well-positioned to succeed.
Librela, in particular, saw an astounding 142% operational growth this quarter, bolstered by a successful U.S. launch, while Solensia achieved 60% operational growth, despite being launched in Europe three years ago.
Zoetis sees significant room for growth ahead, particularly in treating pruritic itch in dogs. With about 11 million dogs in the U.S. alone that could benefit from Zoetis's therapies, the company should be able to tap into a big and largely untapped market.
Several key trends are driving Zoetis’s growth. The demographics of pet owners are shifting towards a younger, more affluent, and highly engaged group, deeply connected by the human-animal bond. These pet owners are willing to invest more money into their pets' health and well-being.
Building on its outstanding performance this quarter, Zoetis is confident in its ability to grow faster than the market and outpace competition, as reflected in the company's raised guidance.
Zoetis now expects revenue for the year to be between $9.1 billion and $9.25 billion, resulting in 9% to 11% operational growth. Adjusted net income is expected to be between $2.64 billion and $2.69 billion, with an adjusted diluted EPS ranging from $5.78 to $5.88.
Kristin Peck addressed concerns about consumer trends, noting that while there may be a decline in overall clinic visits, Zoetis continues to see strong demand for its products, driven by young, affluent pet owners who view veterinary care as essential. Despite broader economic challenges, these consumers remain committed to their pets' health, ensuring continued growth for Zoetis.
In her closing remarks, Peck reiterated confidence in Zoetis's ability to integrate innovation and execution, resulting in a strong second quarter and first half of 2024. Overall, the earnings call showcased a company that is not only thriving today but is also well-positioned for continued growth.