Zoetis (ZTS) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $2.4 billion, up 8% reported and 11% operationally, driven by strong demand for innovative companion animal and livestock products, with notable growth in monoclonal antibody therapies, Simparica Trio, and dermatology franchises.

• Adjusted net income was $711 million, up 9% reported and 18% operationally; adjusted diluted EPS was $1.56, up 11% year-over-year and 20% operationally.

• U.S. segment revenue grew 12% to $1.3 billion, with companion animal up 13% and livestock up 11%; international segment revenue grew 4% reported and 10% operationally.

• Raised full-year 2024 guidance for revenue, adjusted net income, and adjusted diluted EPS based on strong first-half performance.

• Approved a new $6 billion multi-year share repurchase program, the largest to date.

Financial highlights

• Q2 2024 revenue: $2.36–$2.4 billion (+8% reported, +11% operational); adjusted net income: $711 million (+9% reported, +18% operational); adjusted diluted EPS: $1.56 (+11% year-over-year, +20% operational).

• Adjusted gross margin was 71.7%, down 70 bps reported, with FX having a 130 bps negative impact; U.S. gross margin was 82.3%, international 67.0%.

• Adjusted SG&A expenses increased 5–7% and R&D expenses rose 17% year-over-year.

• Effective tax rate on adjusted income improved to 20.0%–20.5%.

• Operating cash flow for H1 2024 was $1.10 billion, up from $732 million in H1 2023.

Outlook and guidance

• 2024 revenue guidance raised to $9.1–$9.25 billion (9–11% operational growth); adjusted net income guidance increased to $2.64–$2.69 billion (13.5–15.5% operational growth).

• Adjusted diluted EPS expected at $5.78–$5.88; reported diluted EPS at $5.35–$5.45.

• Guidance does not yet reflect the planned divestiture of the Medicated Feed Additive portfolio, expected to close in H2 2024.

• Effective tax rate on adjusted income expected at 20.0%–20.5%; full-year adjusted cost of sales expected at ~29.3% of revenue.

• Foreign exchange is anticipated to remain a headwind, reducing reported revenue growth by about 3%.