Zoetis (NYSE: ZTS) raises earnings outlook as U.S. companion animal sales fall 8%

What happened

Zoetis Inc. (NYSE: ZTS) raised its full-year 2026 adjusted earnings guidance on Nov. 5 even as third-quarter revenue fell.

Adjusted diluted EPS guidance is now $6.25 to $6.35, up from $6.15 to $6.25 in the guidance as of Aug. 6. Adjusted net income guidance is $2.60 billion to $2.64 billion, up from $2.57 billion to $2.62 billion. Revenue guidance was narrowed to $9.22 billion to $9.32 billion from $9.12 billion to $9.32 billion.

In the quarter, revenue was $2.4 billion, down 1% on both a reported and an organic operational basis. Net income was $591 million, down 18%. Diluted EPS was $1.44, down 12%. Adjusted net income fell 5% reported and 7% organic operational. Adjusted diluted EPS of $1.75 rose 3% reported. Organic operational results exclude foreign exchange and certain acquisitions and divestitures.

Key numbers

Metric	Latest	Change	Source
Third-quarter revenue	$2.39 billion	from $2.42 billion, -1%	SEC 8-K, Exhibit 99.1
Third-quarter adjusted net income	$720 million	from $754 million, -5%	SEC 8-K, Exhibit 99.1
Third-quarter adjusted diluted EPS	$1.75	from $1.70, +3%	SEC 8-K, Exhibit 99.1
Third-quarter diluted EPS (GAAP)	$1.44	from $1.63, -12%	SEC 8-K, Exhibit 99.1
2026 adjusted diluted EPS guidance (prior: $6.15 to $6.25)	$6.25 to $6.35		SEC 8-K, Exhibit 99.1
2026 revenue guidance (prior: $9.12 billion to $9.32 billion)	$9.22 billion to $9.32 billion		SEC 8-K, Exhibit 99.1

Read more: Zoetis (ZTS) company research

Where the quarter slipped

The decline sat in the U.S. segment, where revenue was $1.2 billion, down 6%. U.S. companion animal revenue fell 8%. The release blames price sensitivity tied to the economy, competitive pressure in dermatology and generic competition. U.S. livestock revenue rose 5%, helped by cattle, swine and poultry.

International revenue of $1.1 billion rose 4%. Companion animal there rose 1% reported and was flat on an organic operational basis. Parasiticides and osteoarthritis pain products led, while lower sales of key dermatology products partly offset them. Livestock rose 8% reported and 9% organic operational, driven by cattle and fish.

Chief Executive Officer Kristin Peck said the quarter was in line with the company's expectations. She said Livestock and Diagnostics growth partly offset continued pressure in Companion Animal, which reflects the breadth of the portfolio.

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Why it matters

OptimistFi has argued that Zoetis turns durable animal health franchises into steady revenue and cash flow growth. The new guidance fits that view only in part. On an organic operational basis, the company now expects full-year revenue to fall 1% to 2%, narrowed from a decline of 1% to 3%. It expects adjusted net income to fall 5% to 7%, narrowed from a decline of 5% to 9%.

The top of each organic range is unchanged and the bottom is higher. The raise means less downside than before, not a return to growth.

Cost guidance also moved. Adjusted R&D expenses are now expected at $705 million to $715 million, down from $720 million to $730 million. The effective tax rate on adjusted income is approximately 20%, down from approximately 20.5%.

Per-share results held up better than dollar profit. Adjusted diluted EPS rose in the quarter while adjusted net income fell. Weighted-average diluted shares were 411.6 million against 443.2 million a year earlier.

Reported results carry heavier charges. Certain significant items totaled $133 million before tax in the quarter against $8 million a year earlier. They include $89 million of asset impairment charges, which cover write-downs of in-process research and development assets acquired from PetMedix in 2023. Adjusted net income excludes a net impact of $129 million for such items, purchase accounting and acquisition-related costs.

Reported diluted EPS guidance moved the other way, to $5.50 to $5.60 from $5.55 to $5.65. The company now expects approximately $210 million of certain significant items and acquisition and divestiture-related costs for the year, up from approximately $150 million.

The strongest caveat is the top line. Revenue fell and U.S. revenue fell harder, so a higher earnings outlook does not show that growth has returned.

Pipeline and approvals

Zoetis said it remains on track for expected 2026 product approvals. Select approvals once expected in 2027 are now expected in the fourth quarter of 2026. In October, the U.S. Food and Drug Administration approved Convenia RTU for Dogs, a long-acting antibacterial injection. It is the second major market approval this year, and the company says both came ahead of expected timelines.

Convenia RTU for Dogs is expected to reach veterinarians in the first quarter of 2027. Simparica Trio also received a U.S. emergency use authorization for treating New World screwworm infestations in dogs and puppies. Zoetis launched Lenivia for dogs in Great Britain during the quarter.

What's next

Zoetis will host a webcast and conference call on Nov. 5 at 8:30 a.m. ET to review the quarter, discuss guidance and take analyst questions.

The next test is the next quarterly report. Smaller declines in U.S. companion animal revenue would support the case that the franchises are durable. Another quarter of falling U.S. revenue alongside rising adjusted EPS would keep the story about cost and share count, not growth. The next dated product milestone is Convenia RTU for Dogs reaching veterinarians in the first quarter of 2027.

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