Morgan Stanley has reiterated its Overweight rating on Zoetis Inc., maintaining a $160.00 price target after the animal-health company released quarterly results. Zoetis shares were trading at $128.67 at the time of the report, giving the company a market capitalization of $56.7 billion, and valuation metrics suggest the shares may be undervalued relative to fair-value estimates.
The brokerage highlighted that Zoetis posted an earnings-per-share beat for the quarter and laid out operational guidance for 2026. Morgan Stanley expects investors to concentrate on the details of those results and, in particular, on the performance and outlook for the US Companion Animal business. That unit is contending with greater competition in dermatology products as well as persistent rivalry in parasiticides, the firm noted.
Sales of the US Trio segment increased 1.6% in the fourth quarter, marking a slowdown from the 3.1% growth reported in the third quarter. Within the companion-animal portfolio, Librela quarterly sales reached $36 million in the fourth quarter. That result fell short of Morgan Stanley's internal estimate of $37 million and consensus expectations of $39 million, and it was lower than the $41 million recorded in the prior quarter.
Morgan Stanley observed that monthly Librela sales trends appear to be stabilizing, and that expectations for the product were already modest heading into the earnings report. The firm also emphasized that the breadth of Zoetis' product portfolio remains a strength that may be underappreciated by the market.
Financial metrics noted in market data indicate that Zoetis retains a "GREAT" overall financial health score of 3.11, with notably strong profit metrics recorded at 4.31 out of 5. On a forward valuation basis, Zoetis trades at 17.2x FY+1 price-to-earnings, which represents a roughly 10-turn discount to its five-year historical average. That multiple is also materially lower than a peer comparison cited at 22.0x FY+1, a contrast the analyst used to support the Overweight stance.
Shareholder-friendly capital allocation was also highlighted. Data show Zoetis has increased its dividend for 13 consecutive years and currently yields 1.65%. Management has been active in repurchasing shares, and the firm noted a recent move to offer $1.75 billion in convertible senior notes with proceeds intended primarily for buybacks.
In related reactions to the financial results, Jefferies reiterated a Buy rating and left its price target at $170. Bank of America Securities moved the other way, downgrading Zoetis from Buy to Neutral and setting a price target of $135, citing heightened competition as a concern.
Zoetis reported adjusted earnings per share of $1.48 for the fourth quarter, surpassing analysts' expectations of $1.40. Management attributed the stronger-than-expected result to higher-than-anticipated revenue and improved gross margins. The company also announced a 6% increase to its quarterly dividend, raising the payout to $0.53 per share, payable on March 3, 2026.
What this means
- Analyst support: A major brokerage keeps an Overweight rating and a $160 target, citing relative valuation and portfolio breadth.
- Companion-animal dynamics: Near-term investor attention is likely to focus on Librela trends and competitive pressures in dermatology and parasiticides.
- Capital returns: Dividend growth, a current yield of 1.65%, aggressive buybacks and a $1.75 billion convertible note offering aimed at repurchases indicate an emphasis on shareholder returns.
Market context and next steps
The mixed analyst responses and the competing signals from product-level sales and overall earnings underscore active debate about near-term growth drivers and competitive dynamics within the companion-animal segment. Investors will be watching subsequent monthly Librela sales updates, the execution of the buyback program, and how competition in dermatology and parasiticides plays out against the company's broader portfolio strength.