Episode Details

Zoetis (ZTS) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): revenue $2.468B vs $2.474B, flat reported and -1% organic operational, against a ~$2.50B Street bar (a 1.3% MISS). GAAP EPS $1.65 vs $1.63; adjusted EPS $1.87 vs $1.78, against a $1.85 bar. But adjusted NET INCOME fell 1%, from $791M to $781M - diluted shares went 445.5M to 417.7M. Companion Animal revenue -$82M; Livestock +$80M; total -$6M. Dermatology $398M vs $473M (-15.9%). U.S. companion animal -11% for a second straight quarter. FY2026 guidance CUT: revenue $9.120-$9.320B (was $9.680-$9.960B), adjusted EPS $6.15-$6.25 (was $6.85-$7.00), organic operational revenue growth (3)% to (1)% (was +2% to +5%). The 8-K was accepted 7:06 a.m. ET Thursday Aug 6 (before the open); the stock closed Thursday at $77.27, +3.87%, then Friday at $72.66, -5.97%. Zoetis beat by two cents - $1.87 adjusted against a $1.85 bar - and the stock gapped up six percent and closed Thursday up 3.87% at $77.27. Friday it closed at $72.66, down 5.97%, BELOW the $74.39 it traded at before the print. The beat lasted exactly one session. Here is what the tape worked out overnight. FIRST: adjusted net income FELL 1% (from $791M to $781M) while adjusted EPS ROSE 5% - both sentences are in the same bullet of the same release. The entire gap is 27.8 million retired shares. Divide $781M by LAST year's 445.5M diluted shares and the quarter earns $1.753 - down 1.3% year over year, and a 9.5-cent MISS against the $1.85 bar. The buyback is 124% of the EPS growth. SECOND: full-year guidance was cut on the same morning - adjusted EPS from $6.85-$7.00 to $6.15-$6.25, a 10.5% cut, and 12.1% below the $7.00-$7.10 set in February. Subtract the $3.40 already banked in H1 and the new midpoint implies an H2 of $2.80 against $3.22 last year - DOWN 13%. THIRD: 'Revenue flat at $2.5 billion' is an accident. Companion Animal fell $82M and Livestock rose $80M, and the release attributes the livestock strength to poultry vaccine sales 'tied to disease outbreak activity' plus New World screwworm. Meanwhile dermatology - Apoquel and Cytopoint - fell 15.9%. THE CALL: HOLD (3/5, MOST OF THE BAD NEWS IS IN THE PRICE, BUT THE COMPANY'S OWN GUIDANCE SAYS THE TROUGH IS STILL AHEAD) — base-case value ~$77.0 vs ~$72.66 today. KEY METRICS: - CALL: HOLD 3/5, fair value $77 vs the $72.66 Aug 7 close (+6%). Bull $106, base $80, bear $55. Street: Hold, 31 analysts, avg target $99.17. - Revenue $2.468B, flat, a 1.3% miss. Adjusted EPS $1.87 vs $1.85 - but adjusted net income FELL 1%. On last year's shares: $1.75, a 9.5c MISS. - FY26 adjusted EPS guidance cut 10.5% to $6.15-$6.25; implied H2 $2.80 vs $3.22. Dermatology -15.9%. 11.7x EPS, 9.5x EBITDA, 7.0% FCF yield. What to watch: UP: U.S. companion animal improving off -11% (it has printed -11% twice running); dermatology stabilising off -15.9%; Lenivia and Portela scaling the OA-pain franchise; the Neogen animal-genomics deal closing and contributing; a price under $62. DOWN: Q3 in early November failing the implied $2.80 second half; livestock giving back the outbreak-driven +23% as poultry and screwworm comparisons normalise; the International Fiscal Year Alignment pull-forward (~$100M in Q1 alone) reversing; the last $1.3B of buyback authorisation running out; escalation in the S.D.N.Y. securities class action over Librela, Simparica Trio, Apoquel and Cytopoint. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.