Zoetis Inc.
ZTS · NYSE
Next quarter
Reports Nov 3, 2026.
Consensus is $1.52 EPS for Sep 2026 across 8 estimates, ranging $1.46 to $1.56.
ZTS Jun 2026
- 1.63%
- $1.84
- $1.87
- —
- $2.47B
Reported results
- $2.47B
- 72.73%
- $691.00M
- $1.65
Highlights
- Adjusted earnings: Adjusted diluted EPS was $1.87, ahead of the $1.84 consensus and up 5% from $1.78 a year ago; GAAP diluted EPS was $1.65 versus $1.63.
- Flat reported revenue: Revenue was $2.468 billion, down 0.2% year over year and up from $2.26 billion in Q1; operational revenue declined 2% as foreign exchange added approximately $35 million, or 2%.
- U.S. companion-animal pressure: U.S. segment revenue fell 7% to $1.266 billion, including a 11% decline in U.S. companion-animal revenue to $1.044 billion, as dermatology, Simparica Trio and Librela faced demand and competitive pressure.
- International offset: International revenue rose 8% to $1.173 billion, or 5% operationally, while International segment earnings increased 12% to $661 million.
- Livestock growth: Global livestock revenue increased 12% to $731 million, supported by cattle demand linked to the New World screwworm outbreak; global companion-animal revenue declined 5% to $1.708 billion.
- Restructuring costs: Restructuring and acquisition-related charges rose to $77 million from $30 million, primarily reflecting employee termination costs under a comprehensive cost and productivity program; adjusted net income was $781 million versus $691 million GAAP.
- Margin mix: Consolidated cost of sales rose to 27.3% of revenue from 26.8%, driven by unfavorable product mix and foreign exchange, while SG&A fell 4% to $592 million and R&D rose 4% to $173 million.
- Capital return and balance sheet: Zoetis repurchased $1.159 billion of stock in the first six months, leaving $1.3 billion under its authorization; June 30 cash was $1.476 billion against $9.048 billion of long-term debt.
- Finance leadership change: Zoetis appointed Jay Saccaro as CFO and COO effective August 17, creating an expanded role overseeing finance and global manufacturing and supply; Wetteny Joseph will remain as a special advisor through early 2027.
Analysis
Zoetis delivered a mixed second quarter: adjusted EPS of $1.87 exceeded the $1.84 consensus by 1.6% and rose 5% year over year, but reported revenue of $2.468 billion was essentially flat versus $2.474 billion and GAAP net income fell 5% to $691 million. The quarter was stronger sequentially, with revenue up from $2.26 billion, net income up from $601 million and GAAP diluted EPS up from $1.42 in Q1. The EPS comparison benefits from a substantially lower share count following repurchases, with diluted shares down to 417.7 million from 445.5 million a year ago.
The defining feature was a sharp geographic divergence. U.S. revenue declined 7%, led by a 11% drop in companion-animal sales amid softer demand, price sensitivity and competition in dermatology and Simparica Trio, while International revenue grew 8% reported and 5% operationally. Livestock revenue rose 12% globally, with cattle demand helped by the New World screwworm outbreak. Cost reduction supported adjusted earnings, but the company recorded $77 million of restructuring charges, mostly employee termination costs, and increased R&D spending 4% to $173 million. Zoetis also announced a CFO/COO transition, adding an operational mandate around manufacturing and supply.
U.S. companion-animal weakness
The U.S. remained the central operating problem. Segment revenue declined 7% to $1.266 billion and segment earnings fell 10% to $837 million. Companion-animal revenue dropped $132 million, or 11%, to $1.044 billion. Management attributed the decline to softer end-market demand, macroeconomic-driven price sensitivity and heightened competition, particularly in dermatology and Simparica Trio. Generic competition also affected Cerenia and Convenia, while Librela sales were lower. U.S. livestock revenue increased $42 million to $222 million, helped by cattle demand and better supply availability.
- Dermatology: Global dermatology revenue declined 16% to $398 million, the largest decline among Zoetis’ major product categories.
- Parasiticides: Global parasiticide revenue rose 6% to $698 million, but this growth did not offset weakness in U.S. companion-animal franchises.
- U.S. margin: U.S. gross margin fell to 83.1% from 84.7%, primarily reflecting lower revenue and unfavorable foreign exchange.
International and livestock growth
International operations provided the main offset to the U.S. decline. International revenue increased 8% to $1.173 billion, comprising 5% operational growth and a 3% foreign-exchange benefit. International segment earnings rose 12% to $661 million, with operational earnings up 8% on higher gross profit. Companion-animal growth came from parasiticides, diagnostics and newly launched long-acting monoclonal antibody pain products, while livestock growth reflected cattle, poultry and other product demand.
- Livestock: Global livestock revenue increased 12% to $731 million, with cattle revenue up 21% to $390 million and poultry revenue up 11% to $115 million.
- Companion animals: Global companion-animal revenue declined 5% to $1.708 billion, as international growth was more than offset by the U.S. decline.
- Foreign exchange: Currency translation added approximately $35 million to second-quarter revenue and $111 million to first-half revenue.
Restructuring and investment
Zoetis is pursuing cost and productivity actions while continuing to invest in its pipeline. Second-quarter restructuring and certain acquisition and divestiture-related costs increased to $77 million from $30 million, primarily due to $74 million of employee termination costs. These items were excluded from adjusted results, which lifted adjusted net income to $781 million from $691 million GAAP and adjusted EPS to $1.87 from $1.65 reported. R&D investment rose 4% year over year to $173 million, reflecting higher project investment and compensation costs supporting innovation and portfolio progression.
- Underlying earnings: Adjusted net income was $781 million versus $791 million a year ago, a 1% decline despite adjusted EPS growth from share repurchases.
- Gross margin: Cost of sales increased 1% to $673 million, taking the cost ratio to 27.3% from 26.8% because of product mix and foreign exchange.
- Operating discipline: SG&A declined 4% to $592 million, partly reflecting lower compensation-related costs and lower certain significant items.
Capital allocation and liquidity
Zoetis continued to return capital aggressively despite higher debt-related costs. It repurchased 11.0 million shares for $1.159 billion in the first six months of 2026, excluding an $11 million excise-tax accrual, leaving $1.3 billion under the $6 billion authorization. Operating cash flow was $1.056 billion, down from $1.120 billion a year earlier, while capital expenditures were $227 million. Cash and equivalents declined to $1.476 billion from $2.450 billion at year-end, partly reflecting repurchases and dividends, while long-term debt was $9.048 billion.
- Financing outflows: Financing cash usage was $1.653 billion in the first half, including $1.190 billion of treasury-stock purchases and $447 million of dividends paid.
- Dividend: The quarterly dividend declared increased to $0.530 per share from $0.500.
- Liquidity: Zoetis had no borrowings under its $1.25 billion revolving credit facility and remained in compliance with its debt covenants.
Leadership and legal matters
The company announced a finance and operations leadership transition alongside the results. Jay Saccaro will become executive vice president, CFO and COO on August 17, combining financial oversight with responsibility for Global Manufacturing and Supply. Wetteny Joseph will move to an advisory role and remain a special advisor to the CEO on financial matters until early 2027. The filing also disclosed a securities class action filed in May and related derivative actions filed in June concerning statements about the safety, competitive position and market share of companion-animal products including Librela, Simparica Trio, Apoquel and Cytopoint. The cases are in early stages, and Zoetis said it believes it has substantial defenses.
- Tax exposure: The IRS has proposed approximately $450 million of additional tax, excluding interest and penalties, related to a 2018 deemed-repatriation tax matter; Zoetis said its existing reserve remains appropriate.
- Genomics acquisition: Zoetis expects to complete its acquisition of Neogen’s animal genomics business in the second half of 2026, subject to regulatory and customary closing conditions.
