Zoetis Builds on Strengths in Second Quarter; Boosting Our Fair Value Estimate

Zoetis reported strong second-quarter performance, buoyed by stellar results from the companion animal segment, and we’ve raised our fair value estimate to $174 per share from $142. The primary factors behind the increase were more optimistic projections for companion animal growth during the explicit forecast period to reflect Zoetis’ robust product pipeline coming to fruition, as well as a slight boost to our long-term growth assumptions based on our confidence in the firm’s ability to innovate and its ever-increasing footprint across all markets in animal health that contributes to its wide economic moat. These drivers were partially offset by a probability-weighted increase in our assumption for the U.S. corporate tax rate beginning in 2022.