Medical stock Zoetis Inc. (ZTS) has gained 11.7% over the past month. Moreover, it has gained 23.4% over the past three months to close the last trading session at $164.93. Wall Street analysts expect the stock to hit $204.33 in the near term, indicating a potential upside of 23.9%.

In addition, ZTS’ dividend payouts have increased at a 25.1% CAGR over the past five years. Its current dividend yield is 0.91%, and its four-year average yield is 0.57%.

The healthcare industry is expected to perform well this year. According to a survey by FTI Consulting, three-quarters of respondents were optimistic about their company’s financial performance. Also, the global healthcare market is expected to reach $665.37 billion by 2028.

Here is what could shape ZTS’ performance in the near term:

Top-Line Growth

ZTS’ revenue came in at $2 billion for the quarter that ended September 30, 2022, up marginally year-over-year. Its revenue from the United States increased 2.3% year-over-year to $1.09 billion.

Also, its revenue from the companion animal segment came in at $1.27 billion, up 5.7% year-over-year, while its revenue from contract manufacturing and human health came in at $23 million, representing a 9.5% year-over-year rise.

Favorable Growth Estimates

ZTS’ revenue is expected to increase 3.5% year-over-year to $8.05 billion for the yet-to-be-reported fiscal year 2022. Its revenue is expected to increase 6.5% year-over-year to $8.57 billion in 2023. Its EPS is expected to increase 3.2% year-over-year to $4.85 for the yet-to-be-reported fiscal year 2023.

Moreover, its EPS is expected to increase 10.1% year-over-year to $5.34. Also, its EPS is expected to rise 10.9% per annum for the next five years.

Robust Profitability

ZTS’ trailing-12-month gross profit margin of 70.09% is 26.8% higher than the industry average of 55.26%. Its trailing-12-month EBITDA margin of 40.60% is 938.5% higher than the industry average of 3.91%.

Furthermore, its trailing-12-month ROCE, ROTC, and ROTA of 44.25%, 15.51%, and 15.12% compare with the industry averages of negative 40.08%, 22.11%, and 31.06%, respectively.

POWR Ratings Reflect Promising Outlook

ZTS’ overall rating of B equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZTS has an A grade for Quality, consistent with its higher-than-industry profitability margins.

It has a C grade for Stability, in sync with its 24-month beta of 1.03.

In the 172-stock Medical – Pharmaceuticals industry, ZTS is ranked #24. Click here for the additional POWR Ratings for ZTS (Growth, Value, Momentum, and Sentiment).

View all the top stocks in the Medical – Pharmaceuticals industry here.

Bottom Line

ZTS reported robust top-line growth in its last reported quarter. Moreover, the industry tailwinds should boost ZTS. And considering its robust fundamentals, ZTS could be an ideal buy now.

How Does Zoetis Inc. (ZTS) Stack up Against Its Peers?  

While ZTS has an overall POWR Rating of B, one might consider looking at its industry peers, Novo Nordisk A/S (NVO), Novartis AG (NVS), and Bristol-Myers Squibb Company (BMY), which have an overall A (Strong Buy) rating.

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ZTS shares were trading at $163.33 per share on Tuesday morning, down $1.60 (-0.97%). Year-to-date, ZTS has gained 11.71%, versus a 6.93% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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