Zoetis, Inc. (NYSE:ZTS)
Second quarter earnings exceeded analyst expectations. Management raised 2015 earnings guidance modestly for the year. Revenue growth in the quarter was impressive. Organic revenue adjusted for foreign exchange was 9%. Approximately 80% of revenue growth in the quarter is attributable to volume growth of recently launched and existing products. Operating expenses, adjusted for foreign exchange, rose only 1%, despite an 11% increase in revenue. Management announced significant progress in its R&D portfolio, including advances in new product innovation and improvements to existing products.
In May, Zoetis announced a large cost restructuring program. Management has begun to take its first steps towards achieving this plan and believes it is on track to deliver its target of at least $300 million of savings, which will increase Zoetis’ operating profit margin from 25% in 2014 to 34% in 2017 according to the company’s second quarter conference call. Thereafter, management expects a combination of continued cost discipline, strong revenue growth, and execution of management’s supply chain efficiency program will result in continuing improvements in operating profit margins.
From Pershing Square's semi-annual 2015 report.
