Zoetis (ZTS) is among the top global companies in the discovery, development, manufacture, and marketing of animal health medicines and vaccines, with a focus on both livestock and companion animals, explains equity analyst Sel Hardy in CFRA Research's The Outlook.

The company markets a diverse range of products for livestock species of cattle (both beef and dairy), swine, poultry, sheep, and fish, and for companion animal species of dogs, cats, and horses.

Main product categories are anti-infectives, vaccines, parasiticides, medicated feed additives, and other pharmaceutical products.

We think ZTS is a defensive stock and offers a solid upside potential given the recent price declines for its share price due to a broader market sell-off resulting from investor concerns of a slow economic recovery and a second wave of Covid-19 infections.

CFRA Research views Zoetis as well positioned to benefit from favorable long-term demand drivers for its industry and that it will outperform peers due to its competitive advantages.

We see ZTS's pricing power as durable and view the company poised for long-term growth in its Companion Animal segment. ZTS's animal health products are critical for customers and often difficult to replace due to structural barriers for generic competition on animal drugs, in our view.

Pet owners are spending more on human-like treats, accelerating  during the Covid-19 pandemic as people spend more time at home and have more time for their pets.

Our 12-month target price is $153, based on a 2022 P/E of 31.4x, within ZTS's historical range of 25x-35x but below the company's current next-12-month forward P/E average of 39x.

We view the company’s animal health products as essential and resilient to recession. The company carries CFRA's highest investment recommendation of 5-STARS, or Strong Buy.

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