Zoetis Inc. (ZTS) PT Lowered to $230 at Jefferies After Earnings

Jefferies analyst David Steinberg lowered the price target on Zoetis Inc. (NYSE: ZTS) to $230.00 (from $235.00) trimming FY22-FY25 revenue by ~1% annually, after the earnings report. Gross margin expansion, however, cushioned the blow, as improving product mix partially offset the lower top line, resulting in only ~$0.03-0.05 cuts to EPS annually.

The analyst stated "we trim our FY22 revenue projections from $8.55B to $8.47B (vs mgmt's guidance range of $8.325B-8.475B). Our model now assumes low-teens growth in the Companion Animal segment (13% y/y) and low singledigit growth in Livestock (3% y/y) for FY22. Mgmt noted that they expect continued pressure from generic competition in both Cattle and Poultry and competitive pricing in vaccines and anti-infectives in swine, especially in 1H22, although there will likely be new product launches and lifecycle management initiatives that should alleviate some of the pressures in 2H22. The modestly lower revenue base in FY22 flows through to outyear cuts of ~1% on the top-line, but this is partially offset by expanding gross margin as ZTS's product mix continues to shift to higher-value categories such as biologics and diagnostic services. When taken together, the changes result in ~$0.03-0.05/share cuts to our EPS estimates through FY25E."

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