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Mixed quarter: strong execution in livestock, international markets, diagnostics, margin improvement ex-FX, EPS and adjusted net income growth, and a solid pipeline/M&A strategy contrast with pronounced weakness in U.S. companion animal (dermatology, parasiticides and OA pain), channel destocking, generic incursions on select products, fiscal alignment timing and FX headwinds. Management has taken decisive cost and commercial actions and provided positive full-year guidance, but near-term risks and competitive intensity leave the recovery path uncertain.
Zoetis updated its full‑year 2026 outlook to organic operational revenue growth of 2%–5% (revenue $9.68B–$9.96B, foreign exchange rates as of late April), adjusted net income of $2.87B–$2.95B (growth 2%–6%), reported diluted EPS $6.35–$6.50 and adjusted diluted EPS $6.85–$7.00; management also expects full‑year adjusted gross margin to be roughly 71.5%, is using an aggregate price assumption of about 1%–2%, anticipates livestock growth in the mid‑ to high‑single digits and key companion‑animal franchises in the low‑ to mid‑single digits, and said its fiscal‑year alignment had been expected to provide ~200–250 basis points of revenue tailwind that Q1 market softness more than offset, leading to a widened guidance range to reflect ongoing macro and competitive uncertainty.
Global livestock revenue $720M, up 12% year-over-year with broad-based growth across cattle, swine, poultry and fish; U.S. livestock grew 7% ($225M) driven by improved supply, spring promotions and vaccine adoption — described as a durable source of growth.
International revenue $1.1B, up 17% reported and 10% organic operationally; international companion animal grew 7% and international Simparica grew 14% (Trio +29%) — emerging markets continue to provide runway for expansion.
Companion animal diagnostics $113M, up 10% driven by expansion of reference labs and growth in chemistry and hematology (Vetscan Opticell); diagnostics cited as a resilient area tied to urgent and diagnostic care.
Adjusted net income $646M (+2% reported, +1% organic); adjusted diluted EPS grew 7% (including a 3% benefit from convertible debt-funded buybacks). Adjusted gross margin 71.8% declined ~10 bps reported, but excluding ~150 bps FX headwind, gross margins improved ~140 bps due to price and lower manufacturing costs.
Company highlighted 12 potential blockbusters and >$7B of additional market opportunity; announced acquisition of Neogen's animal genomics business to expand livestock genetics capabilities, reflecting targeted business development strategy.
Launched comprehensive cost and productivity program to tighten discretionary spending, drive procurement and operating efficiencies and assess organizational levers to deliver a leveraged P&L in 2026 and beyond; reflected in updated adjusted net income guidance.
Updated FY26 organic operational revenue guidance of +2% to +5% (range $9.68B–$9.96B) and adjusted net income growth +2% to +6% ($2.87B–$2.95B), indicating management confidence in recovering trajectory despite Q1 headwinds.
Welcome to the First Quarter 2026 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, and will not be forwarded automatically. In addition, a replay of this call will be available approximately 2 hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. [Operator Instructions] It is now my pleasure to turn the call over to Steve Frank. Steve, you may begin.
Thank you, operator. Good morning, everyone, and welcome to the Zoetis First Quarter 2026 Earnings Call. I am joined today by Kristin Peck, Chief Executive Officer; and Wetteny Joseph, Chief Financial Officer. This morning, we issued a press release announcing our first quarter 2026 financial results. Before we begin, I would like to remind you that the release and corresponding earnings presentation, which we will reference during this call, are available on the Investor Relations section of our website and that many of our statements today may be considered forward-looking statements and that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements in today's press release and in our company's reports filed with the SEC. Additionally, today's remarks will include ce...
