Zoetis Earnings: Strength in Companion Animal Fuels Strong Quarterly Growth

Wide-moat Zoetis delivered strong second-quarter performance that puts the firm on track to meet our full-year projections, and we’re leaving our fair value estimate unchanged. Zoetis saw 9% quarterly operational revenue growth year over year, driven principally by 11% growth in the companion animal segment and aided by 4% growth in production animals. Though distributor shipments have contributed to choppiness in companion animal growth through the first half of 2023, we remain confident that the underlying demand remains solid. Management indicated that quarterly animal clinic revenue rose 9% and revenue per visit also rose 9%. Favorably, the labor issues that had dogged U.S. animal hospitals in 2022 seem to be easing, which means the bottleneck with vets is dissipating.