Zoetis (ZTS), Financial Analysis

1 Revenue & Business Model

• Storyline: Zoetis revenue stopped growing in 2026 as US companion animal sales fell, while livestock and diagnostics grew. US companion animal revenue was $980m in Q3 2026 against $1.07bn; livestock rose to $797m from $746m. Chapters 2 to 4 cover the three revenue drivers: parasiticides and dermatology; osteoarthritis (OA) pain; livestock and diagnostics.
• Reporting basis: until FY2025 Zoetis reported international subsidiaries one month in arrears (fiscal year to 30 Nov). From 1 Jan 2026 the lag was removed and the 2025 quarters were recast in the 2026 filings (Q1 2025 revenue from $2.22bn to $2.20bn). FY2021 to FY2025 annual figures and Q4 2025 (FY2025 less 9M 2025) remain on the old basis; Q4 2025 International included an estimated 2.5% to 3.5% of earlier sales, and Q1 2026 International about $100m of timing benefit. Recast FY2025 annual figures are not in any filing.
• Business (10-K FY2025): two segments, US and International, eight core species and seven product categories, sold in more than 100 countries. FY2025 revenue $9.47bn: companion animal $6.59bn (70%), livestock $2.76bn (29%). Simparica products were about 16% and Apoquel products about 12% of revenue; the top five products about 42%; the largest customer, a US veterinary distributor, about 16%.
• Revenue FY2021 $7.78bn, FY2025 $9.47bn, a 5.0% CAGR, with FY2025 +2% reported and +6% organic operational (non GAAP) after the Oct 2024 sale of the medicated feed additive (MFA) business. TTM Q3 2026 revenue $9.51bn on a mixed basis.
• Segments: US segment earnings were 67.5% of segment revenue in FY2025 and International 53.2%, before central R&D and corporate costs. China revenue fell from $320m in FY2023 to $227m in FY2025; in Q3 2026 organic growth (non GAAP) was +14% in China, (15%) in Germany and (18%) in Japan.

2 Parasiticides and Dermatology: Simparica, Apoquel and Cytopoint Against Elanco's New Products

• Companion animal $1.57bn in Q3 2026, (5.2%), and (5%) organic (non GAAP): US $980m (8.3%) after (11%) in Q1 and Q2 2026; International $585m (+0.7%, flat organic), with parasiticides up and key dermatology down (8-K Ex 99.1).
• Filed product categories (all species), Q2 2026: parasiticides $698m, +5.8%; dermatology $398m, (15.9%). H1 2026 dermatology $747m against $852m (12.3%); H1 parasiticides +4.2%. FY2025 dermatology $1.75bn (+6.0%) and parasiticides $2.34bn (+8.7%).
• Filed detail: Zoetis files revenue by product category; the 10-K FY2025 gives Simparica products at about 16% and Apoquel products at about 12% of FY2025 revenue. The Q3 2026 product categories await the Q3 2026 Form 10-Q.
• Zoetis explanation (10-Q Q2 2026 and 8-K releases): the key dermatology franchise and Simparica Trio faced heightened competitive pressure and macro driven price sensitivity; generic Convenia and Cerenia and lower Librela sales added to the US decline.

How the companion animal market is changing

• Treatment shift (Zoetis innovation webcast, 8-K Ex 99.1 of 2 Dec 2025): JAK inhibitor and antibody therapies reached 69% of treated US dogs with dermatitis in 2025 against 56% in 2019; triple combination parasiticides reached 41% of canine parasiticide patients in 2025 against 19% in 2022.
• Elanco's dermatology and parasiticide products (Elanco 8-K Ex 99.1 of 5 Aug 2026): Zenrelia, a JAK inhibitor competing with Apoquel, reached what Elanco calls blockbuster status in the year to July 2026, with use in about 18,000 US clinics and US JAK share up 9 points year on year; Credelio Quattro reached more than 50% of US clinics; Befrena shipped to nearly 1,400 US clinics.
• Befrena (Elanco 10-K FY2025): an anti IL31 antibody for canine allergic and atopic dermatitis, the same target as Cytopoint, received USDA approval in 2025 and moved from acquired IPR&D to marketed products.
• Peer growth: Elanco Pet Health $718m, +11.7% (Q2 2026); Merck Animal Health companion animal $628m, +6.1% (Q3 2026); IDEXX Companion Animal Group $1.12bn, +10.2% (Q3 2026), against Zoetis companion animal (5.2%).

3 Osteoarthritis Pain: Librela, Solensia and the Long Acting Lenivia and Portela

• Pain and sedation revenue (filed category) $217m in Q2 2026, (2.7%), after $203m in Q1 2026 (1.9%). The category rose from $602m in FY2023 to $851m in FY2024 and was $840m in FY2025. It holds Librela (dogs), Solensia (cats), the long acting Lenivia and Portela and sedation products; Zoetis files the category total only.
• US trend (Forms 10-Q and 8-K releases): lower Librela sales are named among the reasons for the US companion animal decline in Q1 and Q2 2026; the FY2025 Q4 release named Librela and Solensia declines in the US
• International: Q3 2026 International companion animal growth was led by parasiticides and OA pain (8-K Ex 99.1); Lenivia and Portela, with up to three months of pain relief per injection, were approved in Canada and the EU in 2025, launched there in Q2 2026, launched in Great Britain (Lenivia) and approved in Switzerland (Portela).
• Legal: the securities class action filed on 27 May 2026 covers statements on the safety, competitive position and share of Librela among other products (10-Q Q2 2026).

How the OA pain market is changing

• Ageing pets (innovation webcast, 8-K Ex 99.1 of 2 Dec 2025): Zoetis put average dog lifespan at 13 years in the 2020s against 9 in the 1980s, with dogs aged 10 or more 36% of chronic pain patients.
• Dosing interval: Lenivia and Portela give up to three months of pain relief from one injection (8-K Ex 99.1 of 6 Aug 2026); approvals filed so far cover Canada, the EU, Great Britain and Switzerland.
• Safety disclosure: the FY2025 Form 10-K top products risk factor, which names Librela, adds Dear Veterinarian letters and new side effects to the issues that can reduce sales.
• Competitors: Elanco and Merck report companion animal or pet health totals, so the comparison is at segment level.

4 Livestock and Diagnostics: Cattle, Fish and Diagnostics Grow While Companion Animal Declines

• Livestock $797m in Q3 2026, +6.8%, +7% organic (non GAAP): US $266m (+5.1%) on cattle, swine and poultry; International $531m (+7.7%, +9% organic) on cattle and fish. Cattle $439m (+5.8%), fish $98m (+22.5%), swine $120m, poultry $108m.
• Livestock in 2026: Q1 $720m (+14.8%), Q2 $731m (+12.3%), Q3 $797m; US livestock rose 23% in Q2 2026 on cattle demand linked to New World screwworm, with emergency use authorizations for Dectomax CA1 and Dectomax.
• Diagnostics (filed category) $123m in Q2 2026, +11.8%, and $434m in FY2025 (+12.4%); Zoetis bought Veterinary Pathology Group (Nov 2025) and VitalRADS teleradiology (Jul 2026) and agreed to buy Neogen's animal genomics business. The Q3 2026 release does not split diagnostics.
• Vaccines (all species) $521m in Q2 2026, +2.2%, and $1.96bn in FY2025.

How the livestock and diagnostics markets are changing

• Market size (innovation webcast, 8-K Ex 99.1 of 2 Dec 2025): livestock animal health put at $22.9bn in 2024 against $9.4bn in 2005, livestock vaccines $9.5bn in 2024 against $6.4bn in 2016; the global animal health market at about $50bn in 2024 and $65bn to $75bn by 2030 (company and third party estimates).
• New World screwworm: confirmed in the US (8-K Ex 99.1 of 6 Aug 2026); Zoetis received emergency use authorizations for Dectomax CA1 and Dectomax (Q2 2026) and Simparica Trio for dogs (Q3 2026).
• Peers: Elanco Farm Animal $633m, +8.6% (Q2 2026), cattle $313m, +17%; Merck Animal Health livestock $1.05bn, +2.4% (Q3 2026), after buying TARGAN for $647m; Phibro Animal Health segment $293m, +3.4% (Sep 2026 quarter), with $5.2m lower virginiamycin sales in Brazil.
• Diagnostics: IDEXX placed over 1,900 inVue Dx analyzers in Q3 2026 (installed base nearly 11,000), with Companion Animal Group revenue +10.2%; Neogen Animal Safety $59.6m, +4.2% (Aug 2026 quarter), with Animal Safety genomics services $17.3m against $16.5m.

5 Financial Analysis & Ratios

• TTM Q3 2026 operating income $3.39bn, 35.7% of revenue, against 37.5% in FY2025. Operating income here is revenue less cost of sales, SG&A, R&D, amortization and restructuring and acquisition costs; Zoetis reports no operating income line.
• Net income TTM $2.49bn, diluted EPS $5.88, adjusted diluted EPS (non GAAP) $6.62. 9M 2026 net income $1.88bn against $2.05bn; 9M 2026 restructuring and cost reduction charges $125m against $11m.
• Cash flow (latest filed, to 30 Jun 2026): H1 2026 operating cash flow $1.06bn against $1.12bn; capex $227m; TTM Q2 2026 free cash flow $2.32bn on a mixed basis. Q3 2026 cash flow is not yet filed. FY2025 free cash flow $2.28bn.
• Balance sheet at 30 Jun 2026: debt $9.05bn against $6.57bn at end 2024; cash and short term investments $1.68bn; net debt $7.37bn; equity $3.15bn after treasury stock of $11.8bn; ratings A3 (Moody's) and BBB+ (S&P), stable.
• Capital returns: buybacks $3.24bn in FY2025 and $1.19bn in H1 2026; Q2 2026 repurchases 6.21m shares at an average $88.59; $1.27bn of the $6bn program left at 30 Jun 2026. Quarterly dividend $0.53 (+6%) in each 2026 quarter; dividends paid $447m in H1 2026.

Cost structure and profitability

• Gross margin 70.8% of revenue in Q3 2026 against 71.2% (cost of sales excludes amortization); adjusted cost of sales (non GAAP) 29.0% against 28.7%, and about 29.0% guided for FY2026.
• SG&A $582m, 24.3% of revenue; R&D $174m, 7.3%. 9M 2026 SG&A $1.76bn against $1.77bn and R&D $527m against $503m; FY2026 adjusted R&D guidance cut to $705m to $715m.
• Restructuring and acquisition costs $142m in 9M 2026 against $34m under the comprehensive cost and productivity program (accrual $95m at 30 Jun 2026).
• Operating margin 36.1% in Q3 2026 against 38.5%; 9M 2026 36.3% against 38.2%. Net margin 24.7% against 29.8%.
• Fewer shares: Q3 2026 diluted shares 411.6m against 443.2m (7.1%), so adjusted EPS (non GAAP) rose 2.9% while adjusted net income fell 4.5% to $720m.

Convertible notes, buybacks and debt

• Debt $6.57bn at end 2024, $9.04bn at end 2025 and $9.05bn at 30 Jun 2026, after the 2025 issues of $850m 4.150% notes due 2028, $1.0bn 5.000% notes due 2035 and the $2.0bn convertible notes; interest expense $62m in Q3 2026 against $58m.
• Equity $4.99bn at end 2023 and $3.15bn at 30 Jun 2026 as buybacks ($1.86bn FY2024, $3.24bn FY2025, $1.19bn H1 2026) exceeded net income.
• Liquidity: $1.25bn revolving credit facility and a $1.0bn commercial paper program, both undrawn; ratings A3 and P 2 (Moody's), BBB+ and A 2 (S&P), stable (10-K FY2025).

FY2026 guidance revisions

• Revenue guidance midpoint $9.925bn in Feb 2026, $9.270bn in Nov 2026 ($655m, 6.6% lower; low end $605m lower, high end $705m lower); adjusted EPS (non GAAP) midpoint $7.05 to $6.30 (10.6% lower). The Aug release moved the range to a decline; the Nov release raised the low end.
• Implied Q4 2026: revenue $2.10bn to $2.20bn against $2.39bn in Q4 2025 (old basis, incl. earlier international sales); adjusted EPS (non GAAP) about $1.11 to $1.21 against $1.48, from 9M 2026 adjusted EPS of $5.14.

6 MD&A & Management Commentary

Q3 2026 results release (8-K Ex 99.1, 5 Nov 2026); Form 10-Q not yet filed

• Q3 2026 revenue $2.39bn, (1.3%) reported and (1%) organic operational (non GAAP): US $1.25bn, (6%) reported and organic; International $1.12bn, +4% reported and organic. 9M 2026 revenue $7.12bn against $7.09bn (+0.4%).
• Species: dogs and cats $1.49bn (5.6%), cattle $439m (+5.8%), fish $98m (+22.5%), swine $120m (+3.4%), poultry $108m (+1.9%). US companion animal (8%) on price sensitivity, dermatology competition and generic competition; International companion animal flat organic, with parasiticides and OA pain up and key dermatology down.
• Costs: cost of sales 29.2% of revenue against 28.8% (adjusted, non GAAP: 29.0% against 28.7%); SG&A $582m against $582m; R&D $174m against $175m; restructuring and acquisition costs $43m against $4m.
• Below operating income: interest expense $62m; other deductions net $72m, incl. $81m of items excluded from adjusted results, among them the PetMedix IPR&D impairment; tax $138m on pretax income of $729m (18.9%). Items excluded from adjusted net income: $133m pretax, incl. $89m asset impairments (PetMedix IPR&D acquired in 2023, site exits), $30m restructuring under a cost and productivity program and $7m for the ERP move.
• Pipeline and portfolio (8-K Ex 99.1): FDA approval of Convenia RTU for Dogs in Oct 2026, available in Q1 2027; Lenivia launched in Great Britain and Portela approved in Switzerland; FDA emergency use authorization for Simparica Trio against New World screwworm in dogs; select approvals expected in 2027 now expected in Q4 2026; a peer reviewed study found lower heartworm counts with Simparica Trio than with NexGard Plus.
• Q2 2026 (8-K Ex 99.1 of 6 Aug 2026): revenue $2.47bn, flat reported and (1%) organic; US (7%) with companion animal (11%) and livestock +23% on cattle and poultry demand; International +8% reported, +6% organic; guidance cut to $9.120bn to $9.320bn.
• Q1 2026 (8-K Ex 99.1 of 7 May 2026): revenue $2.26bn, +3% reported and flat organic; US (8%) with companion animal (11%); International +17% reported and +10% organic, incl. about $100m of alignment timing; agreement of 2 Mar 2026 to buy Neogen's animal genomics business.
• Price and volume (10-Q Q2 2026): H1 2026 operational revenue fell $53m (1%), with volume from key franchises about (3%), price about +1% and volume from other in line products about +1%; Zoetis names macro driven price sensitivity among the reasons for lower US companion animal sales.

Management and CFO commentary

• Q3 2026 release, guidance table (8-K Ex 99.1 of 5 Nov 2026; Zoetis files no separate CFO commentary): adjusted cost of sales about 29.0% of revenue; adjusted SG&A $2.34bn to $2.37bn; adjusted R&D $705m to $715m, down from $720m to $730m; adjusted tax rate about 20%; excluded items about $210m against about $150m; reported diluted EPS $5.50 to $5.60 against adjusted $6.25 to $6.35.
• CEO Kristin Peck (8-K Ex 99.1 of 5 Nov 2026): Q3 2026 in line with company expectations; pressure in companion animal partly offset by livestock and diagnostics; focus on defending market position and directing resources. Q1 2026 release: pet owner price sensitivity reduced veterinary visits and demand for premium products, and competition rose in dermatology and parasiticides.
• CFO section of the innovation webcast (Wetteny Joseph, 8-K Ex 99.1 of 2 Dec 2025): R&D $463m in 2020 and $686m in 2024 (7.4% of revenue); adjusted EBITDA $3.84bn in 2024 (41% of revenue); revenue CAGR 2020 to 2024 of 8% to 9% (company figures, non GAAP).
• CFO change (8-K of 6 Aug 2026): James Saccaro became EVP, CFO and COO on 17 Aug 2026; Wetteny Joseph provides advisory services until 28 Feb 2027 or an earlier agreed date.

7 Sector & Competitor Analysis

• Sector: medicines, vaccines and diagnostics for pets and farm animals. Zoetis states it is the largest animal health company by revenue (10-K FY2025); Boehringer Ingelheim Animal Health files no SEC reports and is omitted.
• Revenue growth, latest quarter: ZTS (1.3%) (Q3 2026) against IDXX +9.9% (Q3 2026), ELAN +10.2% (Q2 2026), PAHC +6.3% (Sep 2026 quarter) and Merck Animal Health +3.8% (Q3 2026).
• Operating margin, TTM: ZTS 35.7%, Merck Animal Health segment profit 33.5% (FY2025), IDXX 32.3%, PAHC 12.5% and ELAN 1.6% (proxy). Gross margin ZTS 71.4% against IDXX 62.7%, ELAN 55.4% and PAHC 33.8%.
• Net debt: ZTS $7.37bn, ELAN $3.39bn (net leverage 3.1x adjusted EBITDA), PAHC $0.53bn, IDXX $0.18bn.
• Valuation: EV/Sales ZTS 4.46x against IDXX 11.60x, ELAN 3.13x and PAHC 1.36x; P/E on TTM EPS ZTS 14.4x, IDXX 46.0x, PAHC 15.4x; ELAN has a TTM net loss.
• Guidance direction: Elanco raised FY2026 revenue guidance to $5.09bn to $5.14bn (6% to 7% organic constant currency growth) on 5 Aug 2026; IDEXX guides FY2026 revenue of $4.74bn to $4.77bn; Zoetis cut its revenue range twice (7 May and 6 Aug 2026) and narrowed it on 5 Nov 2026.

8 Material Events & Contracts

• 13 Forms 8-K between 5 Nov 2025 and 5 Nov 2026: four results releases (Ex 99.1), the convertible notes filing with five exhibits, four dividend releases, the innovation webcast slides, the CFO change, the annual meeting results and a new director; no Form 8-K/A.
• Convertible notes and capped call (18 Dec 2025): $2.0bn of 0.25% notes due Jun 2029 convert at about $148.20 per share; capped calls on about 13.5m shares with a cap price of $211.715 are expected to reduce dilution or offset cash payments above principal up to the cap. Proceeds funded buybacks of 14.4m shares ($248m at pricing, about $1.54bn by 31 Mar 2026). The same day, lenders waived default treatment of cash payments on conversion under the revolving credit agreement.
• Dividends: quarterly dividend raised 6% to $0.53 from Q1 2026 (8-K of 11 Dec 2025) and declared at that rate for Q2, Q3 and Q4 2026; FY2025 dividends paid $889m.
• CFO and board: James Saccaro joined as EVP, CFO and COO on 17 Aug 2026; Louise M. Parent retired from the board on 20 May 2026; Iris Knobloch, President of the Festival de Cannes and Chair of Deezer, joins on 1 Dec 2026.

9 Ownership, Voting Power & Annual Meeting

• One class of common stock, one vote per share; the largest holder in the proxy held 11.36%. The 2026 proxy lists The Vanguard Group (47.8m shares, 11.36%, Schedule 13G/A as of 31 Dec 2025) and BlackRock (36.5m shares, 8.68%, Schedule 13G/A as of 31 Dec 2023); directors and executive officers as a group held 912,848 shares incl. options and DSUs, about 0.22%. CEO Kristin Peck held 492,586 incl. 386,684 vested options.
• 2026 annual meeting (20 May 2026): 379.0m shares present (90.13% of voting power); all 12 directors elected with 92.2% (Gregory Norden) to 99.3% (Stephanie Tilenius) of votes cast; CEO Kristin Peck 98.6%; say on pay 85.6%, annual frequency chosen; KPMG 97.0%; the shareholder proposal for action by written consent received 46.8% and failed. Louise M. Parent retired from the board on 20 May 2026, before the meeting, under the director retirement policy; Iris Knobloch joins on 1 Dec 2026 (13 directors).
• Insiders, Forms 4 for the 12 months to 5 Nov 2026: three directors bought shares in the open market after the 7 May guidance cut, about $0.89m in total at average prices of $75.39 to $77.76; one open market sale, by CEO Kristin Peck on 17 Feb 2026 (20,000 shares from an option exercise, at weighted average prices of $126.46 and $127.55, about $2.54m) under a prearranged trading plan adopted on 12 Sep 2025. Other Forms 4 cover vesting, tax withholding, gifts and fee deferrals.
• Officers: James (Jay) Saccaro, CFO of GE HealthCare from 2023 and of Baxter from 2015 to 2023, became EVP, CFO and COO on 17 Aug 2026, a new combined role that also oversees manufacturing and supply; Wetteny Joseph advises the CEO until 28 Feb 2027.

10 Risk Factors

• Item 1A of the FY2025 Form 10-K holds 51 risk factors against 47 in FY2024 (14,234 words against 11,775): 4 added (AI, and three on the convertible notes), none removed, 12 materially reworded and 35 unchanged. The Forms 10-Q for Q1 and Q2 2026 report no material changes; the Q3 2026 Form 10-Q is not yet filed.

How risk factors changed

• Comparison: Form 10-K FY2025 (filed 12 Feb 2026) against Form 10-K FY2024 (filed 13 Feb 2025).
• Risk factors rose from 47 to 51 and Item 1A words from 11,775 to 14,234 (+21%).
• The indebtedness section grew from three to six factors after the $2.0bn convertible notes; stated unsecured debt about $9.2bn against $6.7bn a year earlier.
• AI or machine learning appears in three risk factors against one, incl. a new standalone AI factor.
• Tariffs appear in three factors against two; the trade factor now covers sanctions, export controls and anti US sentiment.
• Five top products account for 42% of 2025 revenue against 41% of 2024, with Librela named among them.

11 Stock Price, Scenarios & Sensitivity

• ZTS traded at $84.69 intraday on 5 Nov 2026 after the results release, (5.1%) on the prior close of $89.20 and (41.2%) on the Oct 2025 month end close of $144.09; 35.4% below the 52 week high of $131.01 and 23.1% above the low of $68.77. Month end closes fell from $114.97 (Apr 2026) to $77.69 (May 2026) after the first guidance cut. Market value $35.0bn on 413.2m shares (31 Jul 2026).
• Valuation: 14.4x TTM diluted EPS of $5.88; 12.8x TTM adjusted EPS (non GAAP) of $6.62; 13.4x the FY2026 adjusted EPS guidance midpoint of $6.30; EV/Sales 4.46x; free cash flow yield 6.6% on TTM Q2 2026 free cash flow; dividend yield 2.5% on $2.12 a year.
• Scenario model: revenue grows from TTM Q3 2026 ($9.51bn) for three years to FY2029; margin is GAAP operating margin (35.7% TTM, 37.5% FY2025); interest and other expense $215m a year (FY2026 guidance); 20% tax rate; diluted shares 411.6m less 6% from buybacks; price equals FY2029 model EPS times exit P/E. The exit P/E multiples of 13x, 18x and 24x apply to model GAAP EPS; on the same basis the current P/E is 14.4x.

Critical factors and core assumptions

• Base: TTM Q3 2026 revenue $9.51bn; GAAP operating margin 35.7%; FY2026 revenue guidance $9.220bn to $9.320bn.
• Best case: +6.0% revenue CAGR as launches (Lenivia, Portela, long acting Cytopoint, Convenia RTU) add sales and dermatology share stabilizes; 38% margin as the cost program takes effect, near the FY2025 level of 37.5%; 24x P/E.
• Base case: +3.0% revenue CAGR with companion animal flat to low growth and livestock and diagnostics at mid single digits; price near 0% to +1%; 35.5% margin; 18x P/E.
• Worst case: (1.0%) revenue CAGR as US companion animal declines spread to International, with further share losses, negative price and litigation costs; 31% margin; 13x P/E.
• Shares 411.6m less 6% in all cases (about 2% a year from buybacks; $1.27bn of authorization at 30 Jun 2026); interest and other $215m a year with the 2027 and 2028 notes refinanced; tax rate 20%; quarterly dividend $0.53.

Scenarios, three years forward

Sensitivity analysis

Disclaimer

This analysis is for information only and is not financial advice. It is derived from public SEC filings retrieved via sec-api.io and is not a publication of the U.S. Securities and Exchange Commission. Scenario values are model outputs under stated assumptions and are not forecasts. Data as of 5 November 2026.

Sources

All company figures are read from SEC filings retrieved through the sec-api.io MCP server. Management statements come from the 8-K Ex 99.1 releases and the Forms 10-Q and 10-K. Monthly closing prices are used for the price chart only.