Zoetis (ZTS) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $2.4 billion, up 11% year-over-year and 14% operationally, with net income of $682 million, up 14%, and adjusted net income of $716 million, up 15% operationally; growth was driven by innovation and strong performance in companion animal and livestock portfolios, especially Librela, Solensia, Simparica, and dermatology products.

• Librela and Solensia delivered 97% operational revenue growth globally, with Librela becoming the fourth largest U.S. pet care product and achieving 85% U.S. clinic penetration in its first year.

• Simparica franchise grew 27% operationally, and dermatology franchise (Apoquel, Cytopoint) posted 16% operational revenue growth; Simparica Trio is now the #2 global parasiticide.

• Completed divestiture of the medicated feed additive and certain water-soluble products portfolios to focus on higher-growth areas.

• Strategic partnership with Danone to leverage genetic testing for sustainable dairy production and multiple product approvals and label expansions in key international markets.

Financial highlights

• Q3 2024 revenue: $2.4 billion (+11% reported, +14% operational); adjusted net income: $716 million (+14% reported, +15% operational); adjusted diluted EPS: $1.58 (+16–17% operational); gross margin: 70.7%.

• Adjusted operating expenses up 8–9% operationally; adjusted SG&A expenses: $560 million (+7%); adjusted R&D expenses: $166 million (+10%).

• Q3 2024 effective tax rate on adjusted income: 20.8%, up from 19.6% year-over-year.

• Operating cash flow for the nine months ended September 30, 2024 was $2.05 billion, up from $1.46 billion in the prior year period.

• Adjusted net income margin for Q3 2024: 30%.

Outlook and guidance

• Full-year 2024 revenue guidance raised to $9.2–$9.3 billion (10–11% operational growth); adjusted net income guidance: $2.67–$2.695 billion (13.5–14.5% operational growth); adjusted diluted EPS: $5.86–$5.92.

• Q4 revenue growth expected to decelerate due to the MFA divestiture and prior year launch stocking, but underlying demand remains strong.

• Positive outlook for 2025, with normalization of China headwinds and continued above-market growth expected.

• Guidance reflects impact of divestiture and mid-October FX rates; foreign exchange anticipated to remain a headwind.

• Company believes its cash, cash flows, and credit facilities are sufficient to meet liquidity needs for the next twelve months and beyond.