Why did reported revenue grow only 1% when organic operational growth was 9%?

Foreign exchange reduced revenue by about 4 percentage points, and the divestiture of the medicated feed additive portfolio reduced it by a further 4 points. Excluding these items, underlying growth was 9%, led by Companion Animal.

Why was full-year guidance changed, and what does it mean for shareholders?

Revenue and adjusted EPS guidance were raised, largely because of foreign exchange. Organic growth expectations for adjusted net income were lowered to 5-7% due to enacted tariffs, so the EPS increase is mainly currency-driven rather than operational.

What is the difference between reported and adjusted EPS guidance?

Reported diluted EPS guidance is $5.85-$5.95, while adjusted guidance is $6.20-$6.30. The roughly $0.35 gap at the midpoint is mainly purchase accounting adjustments (about $0.25) and certain significant and acquisition or divestiture-related costs (about $0.10).

Is the Livestock business declining?

Reported livestock sales fell 10%, but this is largely due to the MFA divestiture. On an organic operational basis, livestock grew 7%, led by cattle products in Brazil and other emerging markets and vaccine sales in salmon markets, although U.S. livestock declined organically by 2%.

ZTS 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 6, 2025. Cited figures are marked; the original filing is the authoritative source.

Zoetis (ZTS) reported first quarter 2025 revenue of $2.22 billion^a, up 1% on a reported basis but up 9% on an organic operational basis, which excludes foreign exchange and divestitures.

Reported net income rose 5% to $631 million^b ($1.41 diluted EPS, up 8%). Adjusted net income was $662 million, or $1.48 per diluted share, up 4% and 7% reported and 6% organic operational. Growth was led by Companion Animal, which rose 9% organically, with Simparica Trio, Apoquel, Cytopoint, Librela and Solensia as key drivers.

Livestock declined 10% on a reported basis, largely due to the divestiture of the medicated feed additive portfolio, though it rose 7% organically. Full-year 2025 guidance was mixed. Revenue guidance was raised to $9.425^c-$9.575 billion from $9.225-$9.375 billion, mainly reflecting foreign exchange, while organic operational revenue growth of 6-8% was maintained.

Adjusted diluted EPS guidance was raised to $6.20^d-$6.30 from $6.00-$6.10. Management did, however, lower organic operational growth in adjusted net income to 5-7% from 6-8%, citing enacted tariffs. Reported diluted EPS guidance is $5.85-$5.95, and the adjusted cost of sales ratio was raised to roughly 28.5% from about 28.0%.

The key investor takeaway is strong underlying demand in Companion Animal and International markets, offset by tariff headwinds and a higher cost base. The gap between reported and adjusted EPS guidance (about $0.35 at the midpoint) reflects purchase accounting and significant items that investors should monitor.

02—Key points

Key Highlights

Q1 2025 organic operational revenue grew 9%, but reported revenue rose only 1% to $2.22 billion due to foreign exchange and the MFA divestiture.
Adjusted diluted EPS of $1.48 rose 7% on a reported basis, while GAAP diluted EPS of $1.41 rose 8%.
Companion Animal revenue grew 9% organically to $1.55 billion, driven by Simparica Trio, dermatology products and osteoarthritis mAbs.
International revenue was flat reported but grew 11% organically, with International companion animal sales up 10% organically.
Full-year 2025 revenue guidance was raised to $9.425-$9.575 billion, primarily reflecting favorable foreign exchange, while organic growth guidance of 6-8% was maintained.
Organic operational growth guidance for adjusted net income was cut to 5-7% from 6-8%, citing enacted tariffs, while adjusted diluted EPS guidance was raised to $6.20-$6.30.
Adjusted cost of sales guidance rose to about 28.5% of revenue from about 28.0%, a margin headwind to monitor.

03—Questions

Frequently Asked Questions

Why did reported revenue grow only 1% when organic operational growth was 9%?
Foreign exchange reduced revenue by about 4 percentage points, and the divestiture of the medicated feed additive portfolio reduced it by a further 4 points. Excluding these items, underlying growth was 9%, led by Companion Animal.
Why was full-year guidance changed, and what does it mean for shareholders?
Revenue and adjusted EPS guidance were raised, largely because of foreign exchange. Organic growth expectations for adjusted net income were lowered to 5-7% due to enacted tariffs, so the EPS increase is mainly currency-driven rather than operational.
What is the difference between reported and adjusted EPS guidance?
Reported diluted EPS guidance is $5.85-$5.95, while adjusted guidance is $6.20-$6.30. The roughly $0.35 gap at the midpoint is mainly purchase accounting adjustments (about $0.25) and certain significant and acquisition or divestiture-related costs (about $0.10).
Is the Livestock business declining?
Reported livestock sales fell 10%, but this is largely due to the MFA divestiture. On an organic operational basis, livestock grew 7%, led by cattle products in Brazil and other emerging markets and vaccine sales in salmon markets, although U.S. livestock declined organically by 2%.

04—Continue

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