US$2.391 billion revenue and US$1.75 adjusted EPS reported by Zoetis

Adjusted guidance rises while US pet medicines retreat

Zoetis Inc. (NYSE:ZTS) raised its full-year adjusted earnings guidance after a quarter in which the company’s most important growth engine came under pressure. Revenue fell 1% to US$2.391 billion, while GAAP net income dropped 18% to US$591 million. Adjusted diluted earnings per share increased 3% to US$1.75, helped by the company’s exclusion of purchase accounting adjustments, acquisition and divestiture-related costs and certain significant items.

The guidance update is notably uneven. Zoetis narrowed its full-year revenue range to US$9.220 billion-US$9.320 billion from US$9.120 billion-US$9.320 billion, lifted adjusted net income guidance to US$2.600 billion-US$2.640 billion from US$2.570 billion-US$2.620 billion, and raised adjusted diluted EPS guidance to US$6.25-US$6.35 from US$6.15-US$6.25. Its reported diluted EPS range, however, moved down to US$5.50-US$5.60 from US$5.55-US$5.65.

US companion animal sales expose the pressure point

The quarter’s weakness was concentrated in the United States, where revenue declined 6% to US$1.246 billion. Companion animal revenue fell 8% to US$980 million, with Zoetis citing macroeconomic price sensitivity, competitive pressure in dermatology and generic competition. US livestock revenue provided some offset, rising 5% to US$266 million, supported by cattle, swine and poultry.

International operations offered a sharper contrast. Revenue increased 4% to US$1.116 billion, with international livestock up 8% and international companion animal revenue up 1% on a reported basis but flat on an organic operational basis. Across the group, livestock revenue rose 7% to US$797 million, including an 18% increase in fish products, while total companion animal revenue declined 5% to US$1.565 billion.

Impairment and restructuring charges widen the GAAP gap

The difference between reported and adjusted performance was substantial. Zoetis recorded US$133 million in pre-tax certain significant items during the quarter, including US$89 million of impairment charges tied to in-process research and development assets acquired from PetMedix in 2023. The company said the impairment resulted from updated development and commercial assumptions. Restructuring and cost-reduction charges also included employee termination costs, while the business process transformation programme added further expense.

For the first nine months, revenue was broadly flat at US$7.121 billion, GAAP net income fell 8% to US$1.883 billion and adjusted net income declined 1% to US$2.147 billion. Zoetis now expects about US$210 million of full-year certain significant items and acquisition and divestiture-related costs, compared with approximately US$150 million in its prior guidance.

New approvals offer a test for the portfolio reset

The company is also adding products to a portfolio facing uneven demand. The US Food and Drug Administration approved Convenia RTU for Dogs in October, with availability expected in the first quarter of 2027. Zoetis also expanded access to long-acting osteoarthritis pain treatments in Great Britain and Switzerland, while Simparica Trio received US emergency authorisation for treating New World screwworm infestations in dogs and puppies.

Those launches sit alongside a pipeline that Zoetis said remains on track for expected 2026 approvals, with some approvals previously anticipated in 2027 now expected in the fourth quarter of 2026. The immediate question is whether new products and livestock growth can compensate for continued pressure in US companion animal medicines before the reported earnings outlook becomes more dependent on adjustments.