Zoetis (ZTS) Stifel Jaws & Paws Conference 2025 summary

Tariff and supply chain management

• Actively monitoring evolving tariff situations and prepared with multiple mitigation strategies, including inventory shifts and leveraging dual sourcing.

• 75% of U.S. sales are domestically produced, with a higher proportion of farm animal products made in-country; 99% of IP is U.S.-based.

• Ongoing investments in U.S. manufacturing, including a new Atlanta facility, are expected to further increase domestic production.

• Mitigation levers include shifting inventories, leveraging network flexibility, and, as a last resort, new manufacturing footprints.

• Net tariff impact for 2025 has marginally improved since the last earnings call, with short-term effects being closely monitored.

Revenue and earnings outlook

• Achieved 9% organic operational revenue growth in Q1, with expectations for higher growth in the first half of 2025 due to anticipated competitive launches in dermatology in the second half.

• Adjusted net income growth guidance is 5-7% for the year, with Q1 at 6%; cost of sales impacts from higher-priced inventory will persist through Q2 before easing in the second half.

• Bottom line growth is expected to outpace top line over time, with FX and tax/interest effects influencing annual margins.

• Operating margin expansion has been moderated by FX headwinds, but the company continues to target higher bottom line growth relative to revenue.

Product performance and innovation

• Dermatology franchise continues to see double-digit growth, with significant opportunity remaining among 20 million untreated dogs globally and improved compliance via alternative channels.

• Next-generation long-acting OA pain product is expected to launch within 12 months, with long-acting dermatology following in 12-36 months; new molecules will require new branding.

• Trio parasiticide product maintains strong growth, now representing a significant share of the U.S. market and driving global gains from fifth to second position.

• Alternative channels (e.g., online, direct-to-consumer) now account for about 21% of U.S. companion animal sales, with higher compliance and rapid growth compared to in-clinic sales.