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Zoetis Posts Q1 Financial Results

05/05/2023

In a May 4th release, Zoetis Inc. (ZTS) posted financial results for the 1st quarter of FY 2023 ending March 31st. The Company can be regarded as a bellwether for enterprises manufacturing pharmaceuticals, biologics and nutritional additives for companion animals and livestock industries that market in the Americas, Asia and Europe. Along with competitors Elanco, Phibro, Merck, and Boehringer-Ingelheim, all are subject to the risks of currency fluctuation, disruption of supply-chains and increased costs for products, labor and transport in a competitive environment with livestock producers and consumers impacted by inflation and declining demand.

 

For the 1st Quarter of FY 2023 ending March 31st 2023, net income attained $552 million on revenue of $2,000 million representing a net margin of 27.6 percent.  Comparable figures for the 1st quarter of fiscal 2022 were net income of $595 million on total revenue of $1,986 million. Diluted EPS attained $1.19 for the most recent quarter of fiscal 2023 compared to $1.26 for the 1st Quarter of 2022.

 

In reviewing the components of revenue for the 1st quarter of FY 2023 the Companion Animal Segment represented 61.3 percent of Company revenue with Livestock accounting for 37.9 percent. Within this segment, cattle comprised 52.6 percent; poultry, 18.3 percent; swine, 18.7 percent with aquaculture and other species contributing to the total. Sales to the International segment of livestock amounted to 79.0 percent with the remaining 37.8 percent derived from the U.S.

 

Zoetis has expanded its poultry vaccine portfolio in the U.S. with the 2022 approval of Poulvac® Procerta® HVT-IBD-ND, a trivalent vector vaccine that protects against Marek’s disease, infectious bursal disease and Newcastle disease. This is the third recombinant vector vaccine from Zoetis, following the introduction of Poulvac® Procerta® HVT-ND in 2020 and Poulvac® Procerta® HVT-IBD in 2021.

 

In reviewing Q1 results Kristin Peck, CEO stated, “Today, we reported solid first-quarter results of 4% operational growth in revenue, as expected, based on our diverse portfolio and strength in international markets,” Ms. Peck added “Our International segment led the way, growing revenue 10% operationally, and was partially offset by a decline of 1% in the U.S. Our livestock portfolio drove our results, with 12% operational growth in revenue, while companion animal product revenues were flat operationally. The performance in livestock was based on double-digit operational growth for cattle, poultry, sheep and fish, while our U.S. companion animal portfolio was impacted primarily by short-term effects of distributors de-stocking."

 

In discussing future performance Ms. Peck opined “We continue to see strong end-market demand in companion animal channels, based on data from veterinary clinics, retailers and pet owners. While our sales into distributors declined in the quarter, our product sales from distributors out to the veterinary clinics were up approximately 8%, affirming a healthy petcare market in the U.S."

 

Ms. Peck concluded “We are reiterating our full-year guidance for operational growth of 6% to 8% in revenue and 7% to 9% in adjusted net income. Looking ahead, we see positive indicators and strong demand for our animal health products, and we remain committed to delivering strong growth in 2023, based on our market leadership, innovative franchises, and diverse portfolio, while continuing to invest for the future.”

 

Guidance for FY 2023 includes revenue in a range of  $8,575 to $8,725 million; net income of $2,345 to $2,400 million and a reported diluted EPS ranging from $5.03 to $5.14.

 

On March 31st 2023 Zoetis posted assets of $13,754 million of which $4,195 million comprised intangibles and goodwill against long-term debt and lease obligations of $6,329 million. The Company had an intraday market capitalization of $70,190 million on May 5th 2022. ZTS traded with a forward P/E of 31.7 and has ranged over the past 52-weeks from $125.15 to $187.82 with a 50-day moving average of $169.35. Twelve-month trailing operating margin was 36.3 percent and profit margin 26.2 percent percent.  Return on assets was 12.7 percent and 47.2 percent on equity. At close of trading on May 3rd pre-release ZTS was priced at $177.64 and closed on May 5th post-release at $186.25 on a market up-day with the S&P advancing 1.8 percent.