The Jensen Quality Growth Investment Team Sells Position in Zoetis (ZTS)
November 2025
Company Overview
Zoetis (ticker: ZTS) provides, develops, manufactures, and markets animal health medicines, vaccines, diagnostic products, genetic tests, and biodevices. The company has approximately 300 product lines supporting eight core species. Zoetis is the animal health market leader in terms of revenue.
- Approximately two-thirds of the company’s sales are derived from companion animal medicines with the remaining one-third of sales coming from livestock products.
- The company’s geographic sales mix is 55% U.S. and 45% international.
Investment Thesis and What Led Us to Sell
Zoetis operates as a leader in the animal health market, with solid competitive advantages stemming from its entrenched position in a relatively stable industry. However, sales growth from established drugs has waned, and a once promising drug pipeline has underwhelmed. This setback led to a deterioration in our long-term growth outlook for the business, particularly surrounding growth prospects for its monoclonal antibody drug franchise.
- Competitive Advantages: Zoetis benefits from intellectual property driven by innovation and research and development efforts, barriers to entry, and economies of scale.
- Earnings Stability: Zoetis has a resilient, growing business with revenue that tends to be recurring in nature tied to prescriptions and stable customer relationships.
- Valuation: The company has been experiencing valuation compression attributable to growth pressure and slight deterioration in fundamentals.
The Jensen Quality Growth Investment Team trimmed back our Zoetis position opportunistically throughout 2025 in favor of companies with accelerating growth prospects and improving competitive advantages, recently using proceeds to increase the Quality Growth Strategy’s position in Eli Lilly (LLY). We sold the remaining position and allocated the proceeds toward companies with more attractive risk-adjusted return prospects.
Outlook
Our short- and long-term growth outlooks for Zoetis are constrained. While the company’s core business remains advantaged, slowing growth prospects, reduced consumer spending on veterinary care, and a slight deterioration in fundamentals have, in our view, pressured both near- and long-term expectations.
Strategy holdings are subject to change and should not be considered recommendations to buy or sell any security. Please click here for a listing of the Quality Growth Strategy’s current holdings.
The company discussion is solely intended to illustrate the application of our investment approach and is not to be considered a recommendation by Jensen. The specific security identified is taken from a representative accounts of the Jensen Quality Growth Strategy and does not represent all of the securities purchased and sold for the Strategy. Our views expressed herein are subject to change and should not be construed as a recommendation or offer to buy or sell any security and are not designed or intended as a basis or determination for making any investment decision for any security. Our discussions should not be construed as an indication that an investment in a security has been or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of any security discussed herein.
Certain information contained in this material represents or is based upon forward-looking statements, which can be identified by the use of terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of a client account may differ materially from those reflected or contemplated in such forward-looking statements.
This information is current as of the date of this material and is subject to change at any time, based on market and other conditions.
Jensen Investment Management, Inc., is an investment adviser registered under the Investment Advisers Act of 1940. Registration with the SEC does not imply any level of skill or training. Although taken from reliable sources, Jensen cannot guarantee the accuracy of the information received from third parties.
© 2025 Jensen Investment Management
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