Zoetis Posts Impressive Growth in Third Quarter Despite Generic Intrusion; No Change to Our FVE

Zoetis delivered another strong quarter, which was particularly impressive, as the prior-year period also featured double-digit top-line growth driven by the roll back of shelter-at-home orders. As the firm generally remains on track to reach our full-year projections on the top and bottom lines, we’re leaving our fair value estimate unchanged. Consistent with the long-standing pattern, Zoetis saw the companion animal business lead the way with 19% year-over-year operational growth, which was supported by strength from the U.S. as well as internationally. In contrast, the production animal segment was down 2% in the third quarter operationally, and the main softness came from the U.S. We remain confident in Zoetis’ wide economic moat, especially as the firm has embarked on commercialization of its monoclonal antibody therapies for osteoarthritis in dogs and cats. We think this type of innovation is a good example of Zoetis’ prowess for productive R&D and should add to the firm’s intangible assets through the long term.