Holdings Update: Buy Zoetis (ZTS)

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The Jensen Investment Team Adds Zoetis to the Quality Growth and Global Quality Growth Strategies

March 2024

Zoetis (ZTS) develops, manufactures and markets animal health medicines, vaccines, diagnostic products, genetic tests and biodevices. Approximately 65% of the company’s revenue is derived from products for cats, dogs and horses, and 35% originates from products for livestock. The company features about 300 product lines supporting eight core species. Zoetis was created in 2013 when Pfizer spun out its animal health division, which was founded in 1952. Today, the company generates over $8 billion in annual revenue, of which about half is U.S.-based.

We believe that Zoetis possesses strong competitive advantages including intellectual property, economies of scale, an efficient R&D organization, and a well-known and respected brand. The animal health industry has high barriers to entry and solid long-term growth drivers, including an increasing focus on treating pet diseases, a growing pet population, and significant unmet needs for both pets and livestock. For the five years ended Dec. 31, 2023, the company’s strong market position has enabled it to generate annualized organic revenue growth of 9.2% that it has leveraged into annualized earnings growth of 11.4%. We calculate Zoetis’ five-year average ROE and ROIC to be an impressive 57% and 21%, respectively, as of Dec. 31, 2023. We are pleased to add Zoetis to the Jensen Quality Growth and Jensen Global Quality Growth Strategies.

Please click below to view a list of the Strategy’s current holdings:

Jensen Quality Growth Strategy Holdings

Jensen Global Quality Growth Strategy Holdings

Strategy holdings are subject to change and should not be considered recommendations to buy or sell any security.

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