Jefferies has reaffirmed its Buy recommendation on Zoetis Inc. (NYSE:ZTS), setting a $170.00 price target in the wake of the company's recent financial report. At the time of the latest note, the stock was trading at $128.67, leaving room to the analyst price objective. InvestingPro data referenced by the brokerage indicates Zoetis is trading below its assessed Fair Value.
Jefferies characterized the period as the close of a "volatile year," but highlighted performance that exceeded expectations. Zoetis reported 3% organic growth and adjusted earnings per share of $1.48, a 5.5% increase, both of which outpaced forecasts. The company reported a last-twelve-month gross profit margin of 71.74%, underscoring continued profitability.
Market valuation metrics show Zoetis trading at a price-to-earnings ratio of 21.61. InvestingPro's commentary flagged that multiple as elevated relative to near-term earnings growth potential.
Segment results were mixed. The livestock business delivered robust performance, posting 9% organic growth. Jefferies also noted that improved operational leverage - measured at 145 basis points year-over-year - helped drive the earnings beat. In contrast, the companion animal segment displayed steadier underlying trends; within that portfolio, parasiticide and dermatology products have shown signs of slowing, and pain products continued to decline.
From a shareholder return perspective, Zoetis has increased its dividend for 13 consecutive years and recently recorded dividend growth of 22.69%. The company also announced a 6% rise in its quarterly dividend, bringing the payout to $0.53 per share for the first quarter of 2026.
Looking ahead, the company issued guidance for 2026 that projects organic growth of 3-5%, in line with industry expectations. Jefferies observed that this guidance "does not seem ambitious," noting that some rebound in core business could occur as competitor promotional activity eases. Management also indicated it will raise selling, general and administrative spending by about 5% at the midpoint of guidance, a move intended to support business initiatives.
Additional corporate actions and developments were disclosed alongside the results. Zoetis said it plans to offer $1.75 billion in convertible senior notes due 2029, with proceeds intended primarily for share repurchases. The company also reported fourth-quarter adjusted earnings per share of $1.48 versus analyst expectations of $1.40, attributing the beat to stronger-than-anticipated revenue and gross margins.
On the rating front, Bank of America Securities recently downgraded Zoetis from Buy to Neutral, citing increased competitive pressures affecting performance. Separately, Zoetis received regulatory approval from Health Canada for Portela, its feline arthritis therapy that delivers three months of pain relief with a single injection.
Context and implications
The mix of an affirmed Buy from Jefferies, elevated valuation metrics, targeted reinvestment in SG&A and a sizeable convertible debt issuance frames the current investor view: Zoetis remains profitable and cash-return oriented, but faces pockets of product weakness and competitive headwinds that have prompted at least one other broker to reduce its stance.