) is the only publicly-traded pure-play in the animal health and
vaccines market. This is a global growth business, making it an
attractive long-term investment.
In terms of revenue, the company is the world leader in this
market, and until this year, it was a wholly-owned division of
In January, Pfizer sold 20% of Zoetis to the public through an IPO.
In June, Pfizer offered the remaining 80% to Pfizer shareholders
through an exchange offer. The offer was substantially
oversubscribed. Zoetis is now a fully independent company.
Zoetis offers animal health products for livestock and domestic
pets. Sales of livestock-related products have grown at an 18.5%
rate over the last three years. Pet-related products have grown at
a 12.5% rate.
Zoetis is financially strong, with $468 million in cash and cash
equivalents, and average net profit margins of 10%.
The debt/capital ratio is currently on the high side at 83% because
Zoetis raised $3.65 billion through a bond issue just before the
Full-year earnings per share are expected to range from $1.36 to
$1.42 on revenues of $4.425 billion to $4.525 billion. The current
consensus among analysts is for full-year earnings of $1.40 on
revenues of $5.522 billion.
Major research groups, including Argus, see Zoetis' earnings per
share growing at an 11% compound rate over the next five years.
Both Argus and Deutsche Bank research have a 12-month target price
of $38 for Zoetis. They also agree on a 2014 earnings per share
estimate of $1.62. There is a dividend of $0.26 per share per year
for a current yield of less than 1%.
Following the conclusion of the Pfizer exchange offer, the stock
dipped to a low of $28.97. My rating is to buy Zoetis below $30.
Editor's Note: This article was written by John Dessauer of
John Dessauer's Outlook
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