2 Beaten-Down Pet Stocks Worth Buying Right Now
Pet ownership has skyrocketed during the COVID-19 pandemic, driving the demand for medications, pet food, and other pet-related services. So, beaten-down pet stocks Zoetis (ZTS) and IDEXX Laboratories (IDXX) could...
Pet ownership has skyrocketed during the COVID-19 pandemic, driving the demand for medications, pet food, and other pet-related services. So, beaten-down pet stocks Zoetis (ZTS) and IDEXX Laboratories (IDXX) could bounce back in the near term because the demand for pet-related products and services is expected to grow. So, let's discuss these names.
Pet ownership has risen significantly since the onset of the COVID-19 pandemic. The American Pet Products Association (APPA), in its 2021-2022 National Pet Owners Survey, reported that pet ownership increased from an estimated 67% of U.S. households to an estimated 70%. The study also found that 35% of pet owners spent more on pet supplies, including food, wellness-related products and other pet care items, year-over-year in the trailing 12 months.
Regarding this, Morgan Stanley (MS) equity research analyst Simeon Gutman said, "We think the U.S. pet industry has reached an inflection point, taking topline compound annual growth rates to 8%, versus 3% for the last decade." According to a Morgan Stanley forecast, the average annual household spending per pet could grow from $980 in 2020 to $1,292 by 2025, and could expand further to $1,909 by 2030.
Given this backdrop, we think it could be wise to bet on quality pet stocks Zoetis Inc. (ZTS) and IDEXX Laboratories, Inc. (IDXX). These stocks have slumped in price over the past few months but look well-positioned to rebound soon.
Zoetis Inc. (ZTS)
ZTS in Florham Park, N.J., discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products. The company offers vaccines pharmaceutical products that comprise pain and sedation, antiemetic, reproductive, oncology products, and dermatology products.
On Dec. 7, 2021, ZTS board of directors approved a $3.5 billion share repurchase program over a multi-year period as part of its capital allocation plans. Executive VP and CFO Wetteny Joseph said, "Our financial performance has remained solid this year and allows us to continue making meaningful investments in our business while returning capital to our shareholders."
ZTS' revenue increased 11.4% year-over-year to $1.99 billion. The company's adjusted net income increased 13.9% year-over-year to $597 million. And its adjusted EPS came in at $1.25, representing a 13.6% increase year-over-year.
Analysts expect ZTS' EPS and revenue for its fiscal year 2021 to increase 21.3% and 16% respectively year-over-year to $4.67 and $7.74 billion. It surpassed the Street's EPS estimates in each of the trailing four quarters. The stock has declined 19.5% in price year-to-date to close the last trading session at $196.43.
ZTS' strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ZTS has an A grade for Quality and a B grade for Growth, Stability, and Sentiment. It is ranked #10 of 181 stocks in the Medical – Pharmaceuticals industry. Click here to see the ratings of ZTS for Value and Momentum.
IDEXX Laboratories, Inc. (IDXX)
IDXX develops, manufactures, and distributes products and services for the companion animal veterinary, livestock and poultry, dairy, and water testing markets. The Westbrook, Maine-based concern also sells a line of portable electrolytes and blood gas analyzers used in the human diagnostics market. Its segments include Companion Animal Group (CAG), Water Quality Products and Livestock, Poultry and Dairy.
On Jan. 13, 2022, IDXX's announced the expansion of its reference laboratory menu of tests and services to enable veterinarians to meet the challenges of diagnosing and treating cancer. The development in its oncology offering should help address the growing demand for veterinarians to diagnose and treat cancer.
For its fiscal year ended Dec.31, 2021, IDXX's revenue increased 18.7% year-over-year to $3.21 billion. The company's net income increased 28% year-over-year to $744.84 million. Also, its EPS came in at $8.60, representing a 28.1% increase year-over-year.
For its fiscal year 2023, IDXX's EPS is expected to increase 16.2% year-over-year to $11.02. Its revenue for the quarter ending March 31, 2022, increased 13.9% year-over-year to $840.04 million. It surpassed consensus EPS estimates in each of the trailing four quarters. And over the past six months, the stock has lost 24.7% in price to close the last trading session at $505.53.
IDXX's POWR Ratings reflect solid prospects. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has an A grade for Quality. Within the Medical – Devices & Equipment industry, it is ranked #30 out of 166 stocks. To see the additional ratings of IDXX for Growth, Value, Momentum, Stability, and Sentiment, click here.
ZTS shares fell $196.43 (-100.00%) in premarket trading Tuesday. Year-to-date, ZTS has declined -17.91%, versus a -6.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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