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Zoetis Capitalizing On Lack Of Competition In Generic Animal Drug Competition

Zoetis NYSE:ZTS - Zoetis Capitalizing On Lack Of Competition In Generic Animal Drug Competition

Argus’ Jacob Kilstein believes Zoetis Inc ZTS 1.62% has been benefiting from a “lack of generic competition in the animal drug space.”

Kilstein maintains a Buy rating on the company, while raising the price target from $54 to $58.

Benefiting From Animal Drug Space

The analyst mentioned that the company also continues to benefit from its shorter R&D and launch cycle, given that animal products can be tested more quickly than human drugs.

“The company also benefits from broad diversification across product categories and customers, with a wide range of products for cattle, swine, poultry, and companion animals. This diversification has enabled Zoetis to offset weak sales in a particular segment with stronger sales in others,” Kilstein explained.

Related Link: Barron's Picks And Pans: Good News For Barnes & Noble And Zoetis, But "Beware The Bear"

Q2 And Guidance

Zoetis reported its Q2 results ahead of expectations, with 14 percent growth in operational earnings, driven by the companion animal business, U.S. cattle business, international expansion and new products.

“Management has raised its 2016 adjusted EPS guidance to $1.86–$1.93 from $1.83–$1.90, which assumes stronger sales growth and more moderate currency headwinds,” Kilstein stated.

Outlook

The analyst expects Zoetis’ growth to accelerate into 2017, as issues such as inventory stockpiling and currency losses are cycled through and the restructuring benefits begin to bear fruit.

“Its lead product, Apoquel, a dermatitis treatment for dogs, generated $110 million in sales in 2015 and management projects long-term peak sales of more than $300 million,” according to the Argus report.

The analyst also noted Zoetis has a robust new product pipeline, and CEO Juan Alaix had noted during the Q2 call that the initial sales for the recently launched Simparica were strong.

The EPS estimates for 2016 and 2017 have been raised.

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DateFirmActionFromTo
Sep 2016Argus ResearchMaintainsBelow Average
Aug 2016JefferiesMaintainsBuy
Aug 2016CitigroupMaintainsNeutral

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