Overview
BofA Securities has increased its 12-month price target on Elanco Animal Health to $30.00 from $28.00 and reiterated a Buy rating. The move comes as Elanco continues to trade near its 52-week high and after the company posted quarterly results that topped consensus forecasts.
Shares have climbed about 147% over the past year and were trading at $26.38 at the time of the latest assessment, just below a 52-week peak of $26.87. Some valuation data indicate the shares may be priced above an internally derived fair value estimate.
Management outlook for fiscal 2026
Company management expects relatively even growth across fiscal 2026. The Farm Animal segment is projected to be supported by favorable cattle economics and continued momentum for Experior. The Pet Health franchise is forecast to deliver mid-single-digit-plus growth.
Management signaled that inflationary inventory booked into the first half of the year will create a front-loaded gross margin headwind. As a result, gross margin expansion is expected to be weighted toward the second half of the year as cost savings from the Elanco Ascend program and accelerating price realization begin to build beyond a 2% base established in 2025.
The company said pricing support will come from increased clinic pricing in the U.S. alongside full-year price contributions from recently launched products Zenrelia and Credelio Quattro. Elanco continues to operate with a gross profit margin of roughly 55% and a market capitalization reported at $13.1 billion.
New product contributions and innovation target
Management raised the 2026 innovation target to $1.15 billion. This revised target rests on continued momentum for Credelio Quattro, broader global adoption and U.S. commercialization of Zenrelia, and the planned commercial introduction of Befrena in the second quarter of 2026.
While Befrena is slated for a commercial launch in Q2 2026, management expects its contribution to fiscal 2026 growth to be minimal under the current label and guidance assumptions.
Q4 2025 financial performance
Elanco outperformed expectations in the fourth quarter of 2025. Adjusted earnings per share came in at $0.13, ahead of a projected $0.11, representing an 18.18% earnings surprise. Revenue for the quarter totaled $1.14 billion, above the consensus forecast of $1.09 billion, a 4.59% revenue surprise. These results indicate stronger-than-expected execution for the period.
The positive quarterly performance and the manager-level guidance updates form the basis for the analyst price-target increase and continued Buy stance.
What this means for markets
Analysts and investors will likely weigh the combination of near-term margin pressure from inventory-related inflation against the expected second-half recovery driven by cost savings and price realization. Product rollouts and pricing execution in both the Farm Animal and Pet Health segments will be watched closely as drivers of revenue and margin improvement.
Summary - BofA raised its Elanco price target to $30 and maintained a Buy rating after the company reported stronger-than-expected Q4 2025 results and outlined a broadly steady growth path for fiscal 2026. Management expects a front-loaded margin headwind in the first half of 2026 due to inflationary inventory, with margin expansion weighted to the second half as Elanco Ascend savings and pricing gains materialize.
Key points
- BofA raised its price target to $30 from $28 and kept a Buy rating.
- Elanco posted Q4 2025 adjusted EPS of $0.13 versus $0.11 expected and revenue of $1.14 billion versus $1.09 billion expected.
- Management anticipates even growth in fiscal 2026 - Farm Animal aided by cattle economics and Experior, Pet Health at mid-single-digit-plus growth - with second-half margin improvement driven by cost savings and pricing.
Risks and uncertainties
- Near-term margin pressure from inflationary inventory flows in the first half of fiscal 2026 could weigh on profitability - impacting equities in animal health and broader healthcare suppliers.
- New product launches such as Befrena are expected to provide limited contribution in fiscal 2026 under current labeling assumptions, creating uncertainty around immediate revenue impact.
- Valuation considerations - recent share appreciation has been significant and some data suggest the stock may be trading above an internal fair value estimate, introducing potential downside if expectations are not met.