Revenue: $2.2 billion, growing 1% on a reported basis and 9% on an organic operational basis. Adjusted Net Income: $662 million, growing 4% on a reported basis and 6% on an organic operational basis. Companion Animal Revenue: $1.5 billion, growing 9% operationally. Simparica Franchise Revenue: $367 million, growing 19% operationally. Key Dermatology Revenue: $387 million, growing 10% operationally. OA Pain mAbs Revenue: $147 million, growing 15% operationally. Livestock Revenue: $645 million, growing 7% on an organic operational basis. US Revenue Growth: 2% on a reported basis and 6% on an organic operational basis. International Revenue Growth: Flat on a reported basis and 11% on an organic operational basis. Adjusted Gross Margin: 72.1%, decreased by 140 basis points on a reported basis. Adjusted Operating Expenses: Increased 3% operationally. Adjusted Diluted EPS: Grew 4% operationally and 8% on an organic operational basis. Full-Year Revenue Guidance: $9.425 billion to $9.575 billion. Full-Year Adjusted Net Income Guidance: $2.775 billion to $2.875 billion. Full-Year Adjusted Diluted EPS Guidance: $6.20 to $6.30.

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Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Zoetis Inc (NYSE:ZTS) reported strong 9% organic operational revenue growth in the first quarter of 2025. The International segment led with 11% organic operational revenue growth, showcasing the company's global scale and diversification. The Companion Animal portfolio grew 9% operationally, driven by sustained demand for market-leading franchises. The Livestock segment achieved 7% organic operational growth, with broad-based double-digit performance internationally. Zoetis Inc (NYSE:ZTS) maintained its full-year organic operational revenue guidance range of 6% to 8%, reflecting confidence in its portfolio differentiation and execution capabilities.

Negative Points

The US Livestock segment experienced a 2% organic operational decline, primarily due to aggressive price competition and timing of price adjustments. Adoption of the Osteoarthritis Pain franchise has been more gradual than initially expected, with pet owners taking a measured approach to managing chronic conditions. The company faces potential profitability impacts in the near term due to enacted tariffs, with a $20 million headwind reflected in guidance. Competitive pressures are increasing in key markets, with new entrants expected in the dermatology and parasiticide segments. The operating environment remains unpredictable, with macroeconomic, regulatory, and geopolitical uncertainties posing challenges.

Story Continues

Q & A Highlights

Q: Can you speak to what you're seeing across the US market in terms of the Librela label change and how vets are responding? Also, what is the impact of tariffs on your guidance? A: Kristin Peck, CEO, noted that Librela is experiencing 15% organic growth globally, with 17% in the US. The focus is on building and scaling the new category of care through education and engagement. Wetteny Joseph, CFO, explained that the guidance reflects the net impact of enacted tariffs, primarily affecting imports related to livestock products from China and some diagnostics products. The situation remains fluid, but Zoetis is well-positioned to mitigate impacts due to its diverse geographic footprint.

Q: How are competitive pressures affecting your key franchises, and what are your expectations for Librela's growth? A: Kristin Peck, CEO, emphasized that Zoetis was the first mover in both dermatology and parasiticides, which has helped maintain strong growth despite competition. The company expects its key franchises to grow double digits in 2025. Wetteny Joseph, CFO, added that while adoption of Librela has been slower than expected, the long-term opportunity remains vast, with significant unmet medical needs in the OA market.

Q: Can you explain the $0.20 increase in the 2025 EPS guidance? A: Wetteny Joseph, CFO, attributed the increase primarily to favorable foreign exchange movements, reversing previous headwinds. The guidance now includes a $20 million headwind from enacted tariffs, but organic operational growth expectations remain unchanged from February.

Q: How is the entry of Amazon into the online drug market affecting your sales strategy? A: Kristin Peck, CEO, noted that retail, including Amazon, grew 40% in the quarter, now representing 21% of US business. Zoetis is well-positioned to meet consumer demand across channels, and the entry of Amazon is seen as an opportunity to increase compliance and reach more customers.

Q: What are your expectations for Merck's entrance into the dermatology market, and how is Apoquel Chewable performing? A: Wetteny Joseph, CFO, stated that the guidance considers potential short-term impacts from competitive entrances but remains confident in long-term growth due to first-mover advantages. Apoquel Chewable has seen a 31% conversion rate in the US and 57% in Europe, indicating strong market acceptance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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