Zoetis’s Q2 2025 earnings report revealed a mixed performance, leading to analyst adjustments and a drop in its share prices. While the company surpassed analyst expectations on revenue and EPS, concerns about certain product lines, particularly within the livestock segment and the monoclonal antibody (mAb) products for osteoarthritis (OA) pain, raised questions about the company’s competitive advantage (or “moat”). UBS became one of the first ones to lower the price target for Zoetis to a modest USD 165 not very far from the current stock price of USD 154 as on close of 15th of August 2025.
Here’s a closer look at the key highlights and concerns:
Positive aspects
- Strong overall performance: Zoetis reported an 8% organic operational increase in revenue, driven by a balance of volume and price increases.
- Outperforming forecasts: The company surpassed analysts’ expectations with EPS of $1.76 against a projected $1.62, and revenue of $2.5 billion against an anticipated $2.41 billion.
- Strong companion animal growth: The Simparica franchise (flea, tick, and heartworm) experienced substantial growth, with Simparica Trio seeing a 20% operational increase. The key dermatology franchise also showed strong growth, rising by 11% operationally.
- Increased guidance: Based on strong first-half performance, Zoetis raised its full-year revenue and adjusted EPS guidance, signaling confidence in future growth.Â
Potential concerns
- Livestock segment weakness: US livestock product sales declined 21% due to the divestiture of the medicated feed additive (MFA) portfolio and competition for products like Draxxin. While the company reported some improvement in the global livestock segment, the US decline indicates a need for careful monitoring.
- Slowdown in OA Pain market: The Librela and Solensia monoclonal antibody products for osteoarthritis pain showed a decline in the US, facing challenges related to adoption and potential side effect concerns.
- Analyst reactions: While many analysts maintain positive ratings, UBS lowered its price target and maintained a Neutral stance due to concerns about near-term prospects for multiple expansion and “challenging optics” in the third quarter.Â
In conclusion, Zoetis’s Q2 2025 results present a mixed picture. While the company demonstrates strength in key companion animal segments and raises its full-year guidance, challenges in the livestock and OA pain markets raise questions about its ability to maintain its strong competitive position in the long term. Investors and analysts will likely be watching closely to see how the company addresses these challenges and defends its “moat” in the face of evolving market conditions and increased competition. Zoetis stock is down by little over 16% over past 12 months against strong growth in broader market.