Zoetis (ZTS) Stifel Jaws & Paws Conference 2025 summary

Tariff impact and mitigation strategies

• Tariffs remain a fluid situation, but multiple mitigation levers are available, including shifting inventories and leveraging dual sourcing.

• 75% of U.S. sales are domestically produced, and more is exported than imported, aligning with U.S. manufacturing priorities.

• Both farm and companion animal products are included, with a slightly higher domestic share for farm products.

• Ongoing investments in U.S. facilities are expected to further increase domestic production percentages.

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

Revenue and income growth outlook

• Organic operational revenue growth for 2025 is guided at 6-8%, with Q1 at 9% due to strong performance and favorable comps.

• Competitive launches, especially in dermatology, are expected in the second half, leading to higher growth in the first half.

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

• 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 leverage SG&A and product mix.

Product performance and innovation pipeline

• Dermatology remains a major opportunity, with 20 million untreated dogs globally and compliance improvements driving growth.

• Next-generation long-acting OA pain and dermatology products are expected, with the former targeted for approval in a major market within 12 months.

• New OA pain antibody will be branded differently due to its unique molecule, aiming for longer duration and lower COGS.

• Librela's U.S. launch was rapid and successful, but expansion into moderate/mild cases is slower than expected; education and post-launch studies are underway.

• Trio parasiticide continues to gain share, with triple combinations now the new standard and strong puppy adoption rates.