Zoetis Q4 Earnings Call Highlights

Key Points

• Zoetis reported 6% organic operational revenue growth and 7% organic operational adjusted net income for 2025, with international (8%) and livestock (8%, $2.8B) markets driving performance while overall revenue reached about $9.5 billion.
• For 2026 the company guided to slower growth—3%–5% organic operational revenue and 3%–6% organic operational adjusted net income—expects pricing to normalize to 2%–3%, and is implementing an ERP and fiscal-year alignment that affected Q4 timing; reported revenue is guided to $9.825B–$10.025B with adjusted diluted EPS of $7.00–$7.10.
• The U.S. companion-animal channel showed weakness from price-sensitive pet owners and elevated competition, with the OA pain franchise notably pressured (Q4 OA pain down ~25%, Librela down 32%), prompting targeted actions, even as franchises like Simparica (12% growth, $1.5B) and diagnostics (13% growth) performed strongly.

Zoetis NYSE: ZTS executives said the company delivered organic operational growth in 2025 despite a “dynamic operating environment” marked by macroeconomic pressure on pet owners and a more competitive landscape in key companion animal categories. Management also outlined 2026 guidance calling for moderated growth as those pressures persist, while pointing to a broad portfolio, pipeline progress, and international momentum as key supports.

2025 results: growth led by international markets and livestock

Chief Executive Officer Kristin Peck said Zoetis delivered 6% organic operational revenue growth and 7% organic operational growth in adjusted net income for full-year 2025, which she said was in line with expectations. International markets again outpaced the U.S., with 8% organic operational revenue growth versus 4% in the U.S.

By species, Peck said livestock grew 8% organic operationally, benefiting from a more focused portfolio after the MFA divestiture, while companion animal grew 5% operationally on strength across multiple franchises.

Chief Financial Officer Wetteny Joseph reported full-year global revenue of $9.5 billion, up 2% reported and 6% organic operational, with growth comprised of 4% price and 2% volume. Adjusted net income was $2.8 billion, up 6% reported and 7% organic operational. Joseph added the company finished at the high end of its November guidance range.

U.S. companion animal: softer routine visits, more competition, targeted actions

Peck described continued pressure in the U.S. veterinary channel since the third-quarter call, citing “economic pressure on Gen Z and millennial pet owners” that has contributed to a decline in therapeutic visits and doses. She said emergency and urgent care remained strong, which management views as reflecting price sensitivity and tighter budgets rather than a decline in underlying demand for care.

Peck said some clinics are reacting by taking a more measured approach to overall cost of care. She also pointed to “elevated promotional launch activity” in the market that she said historically has not been sustainable. In response, Zoetis is taking targeted actions including optimizing channel mix, increasing reach and frequency with veterinarians, and expanding medical education to reinforce scientific leadership.

During Q&A, Peck said demand has remained high but pet owners have reacted to sizable price increases at vet clinics over the last three years. She said veterinarians are focused on providing better value, noting that when pets get sick, owners are still bringing them in.

Key franchises: Simparica and dermatology grew; OA pain declined

Management highlighted performance across several major companion animal franchises in 2025:

• Simparica franchise: Peck said the franchise grew 12% operationally for the year with double-digit performance in both the U.S. and international markets. Joseph reported $1.5 billion in 2025 revenue for the franchise. Peck said Simparica Trio grew 13% operationally, with U.S. sales surpassing $1 billion and continued gains at initiation and the highest puppy share in clinics.
• Dermatology: Peck said the dermatology franchise grew 6% operationally for the year, with strong international contributions. Joseph reported the key dermatology portfolio grew to $1.7 billion in revenue. Management cited direct-to-consumer investments, Apoquel Chewable conversion, and targeted outreach as part of its execution amid competition.
• OA pain monoclonal antibodies: Peck said the franchise declined 3% operationally for the year. Joseph reported full-year OA pain mAbs revenue of $568 million. Peck said Solensia grew 7% operationally, while Librela declined 6% operationally, though she said monthly sales trends were stabilizing and satisfaction remained high. She also said the company continues to engage in dialogue with regulators globally to monitor adverse events and keep prescribing information up to date.
• Companion animal diagnostics: Peck said diagnostics delivered 13% operational revenue growth in 2025, citing innovation including the launch of Vetscan OptiCell and menu expansion for Imagyst. Joseph said U.S. companion animal diagnostics grew 14% for the year and international diagnostics grew 11%.

On livestock, Peck said the portfolio delivered 8% organic operational revenue growth with double-digit international contributions and broad-based momentum across species and geographies. Joseph reported $2.8 billion of livestock revenue for the year and said international livestock grew 10% organic operationally to $1.9 billion, which he said fully offset the revenue impact of the MFA divestiture.

Q4: international timing shifts lifted reported quarter; OA pain pressure continued

For the fourth quarter, Joseph reported revenue of $2.4 billion, up 3% reported and 4% organic operational, driven by 3% price and 1% volume. Adjusted net income was $648 million, up 3% reported and 4% organic operational.

International fourth-quarter revenue growth included a timing impact. Joseph said operational changes tied to expected fiscal-year alignment for non-U.S. subsidiaries accelerated sales into the reported fourth quarter, increasing international segment sales by approximately 2.5% to 3.5%—a trend he said is not expected to recur at the end of fiscal 2026.

In the U.S. during Q4, Joseph said companion animal declined 1% operationally and livestock grew 3%. He attributed much of the U.S. companion animal decline to the OA pain franchise, which fell 25% in the quarter. Librela posted $36 million in Q4 revenue, down 32%.

2026 outlook: slower growth, normalizing price, ERP and fiscal-year alignment work

Zoetis guided to 3%–5% organic operational revenue growth in 2026 and 3%–6% organic operational growth in adjusted net income. On a reported basis, Joseph guided to revenue of $9.825 billion to $10.025 billion, and adjusted diluted EPS of $7.00 to $7.10 (reported diluted EPS $6.65 to $6.75).

During Q&A, Joseph said the company expects pricing to return to a more typical range of 2%–3%, with the remainder of growth driven by volume depending on where results fall within the guidance range.

Joseph also detailed a multi-year ERP transition and efforts to eliminate the one-month reporting lag for non-U.S. subsidiaries by aligning the fiscal year with calendar year 2026 globally. He said the company expects to recast prior financial statement periods once the alignment is adopted, and emphasized there will not be a 13-month year. Management acknowledged certain shifts that accelerated some sales into Q4 2025 and delayed processing of certain customer orders into calendar year 2026, but characterized the net effect discussed as not large enough to materially swing the full-year 2026 growth range.

On capital allocation, Joseph said Zoetis completed a convertible bond offering in December that supported a $1.75 billion common stock buyback. In total, the company returned more than $3.2 billion to shareholders through share repurchases in 2025 and an additional $800 million in dividends.

On pipeline and upcoming launches, Peck said Zoetis has 12 potential blockbusters in development, defined as products with at least $100 million in annual revenue. She also said Lenivia is expected to launch in the first half in the EU and Canada, with U.S. approval expected in 2027. Management said its 2026 outlook includes contributions only from long-acting OA products in markets where approvals have been granted.

About Zoetis NYSE: ZTS

Zoetis Inc NYSE: ZTS is a global animal health company that develops, manufactures and markets a broad portfolio of products and services for companion animals and livestock. The company's offerings include pharmaceuticals, vaccines and biologics, parasiticides and anti-infectives, as well as diagnostic instruments, consumables and laboratory testing services. Zoetis serves the veterinary community, livestock producers and other animal-health customers with products designed to prevent, detect and treat disease and to support animal productivity and welfare.

Zoetis traces its roots to the animal health business of Pfizer and became an independent, publicly traded company following a 2013 separation and initial public offering.

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