Its revenue grew by just 2% in 2025, the weakest expansion rate in ten years. It is the US livestock segment - a tenth of consolidated revenue - that is feeling the pinch the most, with sales down 14%. However, momentum remains solid in the pet segment.
Fresh price increases are enabling Zoetis to defend its margins, hence another rise in net profit, from $2.49bn to $2.67bn between 2024 and 2025. Investors wanted more, and have been punishing the group for some time now: its valuation has been revised from an average multiple of nearly 40x earnings to under 20x.
As MarketScreener predicted in these same columns a few months ago, the group is taking advantage of these conditions to step up share buybacks. They total $3.2bn in 2025, almost triple the $1.1bn in 2024. In parallel, the dividend roses again - by over $100m over twelve months - with distributions increasing from $786m to $889m.
Notably, the larger buyback program was financed by an issue of convertible debt, carrying a 0.25% coupon with a conversion price of $149. This funding looks surprisingly shrewd, especially as Zoetis has implemented option mechanisms and cash-settlement features to limit potential dilution.
The recent valuation reset brings it back into fair-value territory - hence the appeal of leaning on buybacks - all the more so for a group whose business generates a return on equity of over 50% without resorting to leverage.
Animal health remains an attractive line of business. In many respects, it combines the most appealing features of the pharmaceutical industry while avoiding its main weaknesses. Distribution is carried out mainly direct, without intermediaries that erode margins, while insurers play only a marginal role, removing thorny reimbursement issues.
Moreover, development costs are lower and product longevity higher - several franchises in Zoetis' portfolio have dominated their segments for twenty to thirty years - resulting in remarkably high profitability. Zoetis generates 2/3 of its revenue in the pet universe, where margins are higher and pricing power more pronounced than in livestock.
Finally, thanks to its unmatched scale, the group outspends all its rivals in investments in R&D and distribution capabilities. It is therefore cementing its dominant position, and stands out as the natural consolidator of its sector should the opportunity arise. Animal-health blockbusters rarely exceed $100m in revenue, which to date has largely discouraged competition from generic manufacturers.
Their rise remains modest for now, even though this trend could change. This is probably the main risk hanging over the sector, which could shift from a world of quiet monopolies to a new reality of active defence of market share.
