October 6, 2017

ZTS – Market expectations are for recovering Uniform ROA, but management’s concerns about revenue growth imply this may be unwarranted


  • Zoetis Inc. (ZTS:USA) currently trades near historical averages relative to UAFRS-based (Uniform) Earnings, at a 26.6x Uniform P/E. At these levels, the market has bullish expectations for the firm, which may be unwarranted given management’s concerns about revenue growth
  • Specifically, management appears concerned about the sustainability of U.S. livestock sales growth, SRS vaccine revenue growth, and growth in their total dermatology portfolio. Should the firm fail to drive Uniform Turns back to historical peaks, as management sentiment suggests, equity downside would be warranted

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