ZTS
The pet medicine party is getting less fun
Zoetis just got a fresh reminder that even the best-known names in animal health can run into the wall. The stock has already dropped roughly 30%, but the latest downgrade says that might not be enough to fully reflect what’s going on under the hood.
The core problem is the U.S. companion animal business, where sales fell a brutal 11% year over year in Q1. That’s the kind of number that makes investors sit up straight, especially when the weakness is tied to generic competition chewing into legacy drugs like Convenia and Cerenia.
Cyclical slump, or something stickier?
Here’s the debate: is this just a temporary slowdown, or is the business model getting structurally lighter in the wallet?
The bearish read is basically this:
- Older blockbuster drugs are getting squeezed by generics
- The U.S. pet segment is the main pressure point
- A valuation around 12x 2026 EPS may not be cheap enough if those headwinds linger
That’s not exactly the vibe you want from a company that’s supposed to be the defensive, tail-wagging corner of healthcare.
What’s holding up the story
It’s not all gloom and chew toys. Zoetis still got some help from international sales and its livestock segment, which helped offset part of the U.S. weakness. So the company isn’t in freefall — it’s more like the engine is still running, but one cylinder is clearly misfiring.
Big picture: if the generic pressure keeps biting into legacy products, investors may have to stop treating Zoetis like a sleepy defensive and start treating it like a company in transition.