BofA keeps Elan as top pick in animal health sector ahead of 2Q26
Investing.com -- Bank of America maintains a cautious view on the animal health sector heading into second-quarter 2026 earnings, with Elanco Animal Health remaining its top pick while keeping neutral ratings on Zoetis and Idexx Laboratories.
The bank said the same factors that pressured the sector in the first quarter continue to affect second-quarter results, including declining veterinary visits and increased drug competition. The firm noted that investor sentiment toward animal health stocks remains negative, particularly for Zoetis and Idexx.
Zoetis has reached all-time valuation lows, according to the report. Bank of America maintained its neutral rating on the stock, citing potential challenges from near-term headwinds including competition.
The firm kept its buy rating on Elanco, pointing to a clearer catalyst profile and potential for estimate increases. Bank of America also maintained its neutral rating on Idexx, expecting second-quarter results to align with estimates without major surprises.
Veterinary visit data from VetSource showed second-quarter declines of 1.9% year-over-year, consistent with first-quarter trends. July data indicated steeper declines of 4% year-over-year, though Bank of America noted that July 4 holiday timing may have caused distortion.
The bank expects veterinary visits to decline approximately 2% for fiscal year 2026 and does not anticipate a sustained improvement in the near term.
During the second quarter, CATalyst Council, a third-party firm whose board includes former Idexx CEO Jon Ayers, published market analysis forecasting visit declines continuing past 2030 with a fiscal year 2027 trough of negative 2.2%. The publication contributed to pressure on Idexx shares during the quarter.
On pricing, Bank of America said Elanco continues to raise prices while remaining below Zoetis levels. New market entrants are pricing below established companies. The bank said its channel checks found no evidence of meaningful price cuts from Zoetis, with management guiding to 1% to 2% price increases.