Zoetis Inc. (ZTS) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal strong financial performance, especially in companion animal diagnostics and livestock portfolios. Despite competitive pressures, the company maintains a positive outlook with innovative product launches and strategic market positioning. The guidance is optimistic, with expected growth in key segments. Although management was vague on some details, the overall sentiment is positive, supported by strong revenue growth and strategic initiatives.
Key Financial Performance
Revenue Global revenue for 2025 was $9.5 billion, growing 2% on a reported basis and 6% on an organic operational basis. Growth was driven by 4% from price and 2% from volume. The growth reflects the diversity of the portfolio and strong commercial relationships.
Adjusted Net Income Adjusted net income grew 6% on a reported basis and 7% on an organic operational basis to $2.8 billion. This growth was attributed to disciplined execution and ongoing investments in innovation.
Simparica Franchise Revenue The Simparica franchise reported $1.5 billion in revenue for 2025, growing 12% operationally. Simparica Trio became the #1 selling canine parasiticide globally, driven by market expansion and conversion from older therapies.
Key Dermatology Portfolio Revenue The key dermatology portfolio grew 6% operationally to $1.7 billion in revenue. Growth was driven by execution, distribution strategy adjustments, and the differentiation of offerings.
OA Pain Monoclonal Antibodies Revenue OA pain monoclonal antibodies declined 3% operationally to $568 million in revenue. Despite the decline, the products have expanded the OA space significantly since their launch.
Companion Animal Diagnostics Revenue Companion animal diagnostics grew 13% operationally in 2025. Growth was driven by innovation, including AI-enabled capabilities and new product launches like Vetscan OptiCell.
Livestock Portfolio Revenue The livestock portfolio delivered $2.8 billion in revenue, growing 8% on an organic operational basis. Growth was broad-based across species and geographies, driven by consistent demand and solid execution.
U.S. Revenue U.S. revenue was $5.1 billion, flat on a reported basis but grew 4% on an organic operational basis. Growth was balanced across companion animal and livestock portfolios.
International Revenue International revenue grew 4% on a reported basis and 8% on an organic operational basis to $1.9 billion. Growth was driven by companion animal and livestock portfolios, with strong contributions from the Simparica franchise and key dermatology.
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Operating Highlights
Simparica Franchise: Grew 12% operationally for the year, with double-digit performance in both the U.S. and International markets. Trio sales surpassed $1 billion in the U.S., maintaining its position as the #1 selling canine brand globally.
Companion Animal Diagnostics: Delivered 13% operational revenue growth for the year, supported by AI-enabled capabilities and new product launches like Vetscan OptiCell and AI Masses.
OA Pain Franchise: Declined 3% operationally for the year. Solensia grew 7% operationally, while Librela declined 6% operationally. New approvals like Portela and Lenivia are expected to enhance the portfolio in 2026.
International Markets: Delivered 8% organic operational revenue growth, driven by strong contributions from livestock and companion animal portfolios.
U.S. Market: Grew 4% organically, with challenges in the veterinary channel due to economic pressures on younger pet owners and increased competition.
Omnichannel Strategy: Enabled double-digit contributions from retail and home delivery, improving compliance and access for customers.
ERP System Transition: Initiated a multiyear, multiphase ERP system transition to enhance operational efficiency and global reporting alignment.
MFA Divestiture: Focused livestock portfolio post-divestiture, contributing to 8% organic operational revenue growth in livestock.
Innovation Pipeline: 12 potential blockbuster products in development, each with at least $100 million in annual revenue potential, including advancements in OA pain management and diagnostics.
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Risk or Challenges
Economic pressure on Gen Z and Millennial pet owners: Decline in therapeutic visits and doses due to price sensitivity and tighter household budgets, impacting routine care for pets.
Competitive landscape: Increased promotional launch activity and competition in the veterinary channel, creating pressure on market share and pricing.
OA pain franchise performance: Decline in operational revenue for OA pain products, particularly Librela and Solensia, due to market challenges and adverse events monitoring.
Macroeconomic environment: Broader U.S. macroeconomic pressures affecting consumer spending and clinic visits, with gradual improvement expected in 2026.
Regulatory challenges: Ongoing dialogue with regulators to monitor and evaluate adverse events for OA pain products, which could impact product usage and reputation.
International market conditions: Softer macroeconomic conditions in key markets like Brazil, affecting sales of products such as Simparica.
Supply chain and operational adjustments: Operational changes related to ERP system transition and fiscal year alignment, causing temporary sales timing shifts and potential disruptions.
Increased competition in dermatology and parasiticides: New entrants and promotional activities in these categories, challenging Zoetis' market position and requiring strategic adjustments.
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Guidance & Outlook
Revenue Growth: Zoetis is guiding to a range of 3% to 5% organic operational revenue growth for 2026.
Adjusted Net Income Growth: The company expects 3% to 6% organic operational growth in adjusted net income for 2026.
Companion Animal Business: Expected to remain a key growth driver in 2026, supported by a differentiated portfolio, despite intensifying competition in parasiticides and canine dermatology.
Livestock Portfolio: Anticipated robust contributions to growth, aided by global increases in protein demand and favorable producer economics, with mid-single-digit organic operational growth expected in 2026.
Long-Acting OA Products: Outlook includes contributions from long-acting OA products in markets with approvals but excludes revenues from products or geographies without approvals.
Adjusted Cost of Sales: Expected to be approximately 28% of revenue in 2026.
Adjusted SG&A Expenses: Projected to be between $2.43 billion and $2.49 billion for 2026.
Adjusted R&D Expenses: Expected to be between $715 million and $725 million in 2026.
Adjusted Interest Expense and Other Income Deductions: Expected to be approximately $200 million in 2026.
Adjusted Effective Tax Rate: Projected to be approximately 20.5% for 2026.
Adjusted Net Income: Expected to be in the range of $2.975 billion to $3.025 billion, representing growth of 3% to 6% on an organic operational basis.
Adjusted Diluted EPS: Projected to be in the range of $7 to $7.10 for 2026.
Reported Diluted EPS: Expected to be in the range of $6.65 to $6.75 for 2026.
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Shareholder Return Plan
Dividends: In 2025, Zoetis returned $800 million to shareholders through dividends, consistent with their long-term approach to capital deployment.
Share Buybacks: Zoetis completed a $1.75 billion common stock buyback in December 2025, supported by a convertible bond offering. In total, the company returned more than $3.2 billion to shareholders through share buybacks in 2025.
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Key Q&A
Q:What is the company's perspective on competition for 2026 and its impact on key brands?
A:The company anticipates competition in 2026, particularly in the derm space, with potential launches of JAK competitors and IL-31 products in the U.S. They have factored these into their guidance, expecting a deceleration in growth due to aggressive promotions by competitors. Derm achieved 6% growth for the year but only 1% in Q4, reflecting anticipated moderation.
Q:What is the company's guidance on price versus volume for the next year?
A:The company expects to return to a normal price range of 2% to 3%, with the balance being volume. At the low end of the range, price contributes 2-3 points, while at the higher end, there is more balance between price and volume.
Q:What does the 3% to 5% operational guidance incorporate for U.S. companion animal operational growth?
A:The guidance incorporates the company's broad and innovative portfolio, leadership position, and resilience in the animal health market. Despite macroeconomic pressures, consumers continue to prioritize spending on animal health. The guidance also factors in shifts related to the international segment's fiscal year alignment.
Q:What are the dynamics affecting Trio's growth and its outlook for 2026?
A:Trio remains the leading product in the U.S., with over $1 billion in revenue. Triple combinations have grown to 50% of the market, and Trio has a strong first-mover advantage. The company expects the Simparica franchise, including Trio, to lead growth in 2026, despite some delayed revenue recognition from Q4 into Q1 2026.
Q:How does the company view the sequential growth for 2026 given financial accounting changes and macroeconomic conditions?
A:The company expects tougher comps in the first half of 2026 due to macroeconomic shifts and competitive launches. Aggressive promotions by competitors may extend into the year, but the company anticipates stabilization and improvement in the pet owner macro situation as the year progresses.
Q:What is the company's approach to pricing and strategy for 2026?
A:The company maintains a consistent approach to pricing, evaluating product value on a market-by-market basis. They leverage their broad portfolio to drive volumes where legally allowed and focus on innovation to sustain growth. No significant shifts in pricing strategy are anticipated.
Q:What is the status of Lenivia's approval process with the FDA?
A:Lenivia is expected to be approved in the U.S. in 2027. The company is currently preparing for its launch in the EU and Canada in the first half of 2026.
Q:What are the company's assumptions for the derm market in 2026?
A:The company expects mid- to high single-digit growth in the derm market, with contributions from key franchises. The Simparica franchise is expected to be the leading driver of growth.
Q:What are the key patent expiration dates for Simparica and Apoquel?
A:The patent for Apoquel is expected to expire around 2032. Specific dates for Simparica were not detailed in the transcript, but public filings provide more information.
Q:What is the company's perspective on competitive pressure for Trio in 2026?
A:The company has not seen significant impact from competitors in the triple combination space. Trio remains the clear leader, with strong first-mover advantage and high satisfaction levels. The company expects to continue leveraging its strengths to expand this market.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the financial impact of the fiscal year alignment and delayed revenue recognition for 2026. They also did not clarify the exact contribution of delayed processing to the 3% to 5% operational growth guidance. Additionally, they refrained from giving quarterly guidance or specific growth expectations for the U.S. segment within the overall guidance.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Masses
AI capability
Aquaculture demand
Companion animal
Full Financial
Full today
GDP income
GLP use
Gen owner
Group momentum
Imagyst
Librela
Trio
Vetscan
ability OA
access
acquisition
action
benefit
cost care
development
diagnostics portfolio
digit contribution
disease
footprint
importance
innovation
livestock
model
need foundation
pain franchise
population
position strength
science
shift
therapy
visit
ZTS Transcript
Zoetis Inc. (ZTS) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call summary and Q&A reveal strong financial performance, especially in companion animal diagnostics and livestock portfolios. Despite competitive pressures, the company maintains a positive outlook with innovative product launches and strategic market positioning. The guidance is optimistic, with expected growth in key segments. Although management was vague on some details, the overall sentiment is positive, supported by strong revenue growth and strategic initiatives.
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Neutral1-12
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Neutral12-4
Zoetis Inc. (ZTS) Q3 2025 Earnings Call Transcript
Positive11-4
The earnings call summary and Q&A indicate a generally positive outlook. The company raised its guidance for revenue and net income growth, reflecting confidence in its performance. Despite some challenges in specific areas like Librela and OA pain, the company expects stabilization and growth in key franchises. The livestock segment shows strong growth, and international market expansion is promising. Adjusted gross margins have improved, and there is a strategic focus on innovation and market expansion. Overall, the positive aspects outweigh the negatives, suggesting a likely positive stock price movement.
ZTS Slides
ZTS Report
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