Zoetis: Healthcare for Pets

11/04/2016 9:00 am EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

One area that seems to get overlooked when talking about healthcare stocks are those firms focused on healthcare for animals, suggests Chuck Carlson, editor of DRIP Investor.

One major player in this group worth owning is Zoetis (ZTS), which is perhaps the world’s most established player in animal health. With nearly $5 billion in annual revenue, its products are sold in more than 100 countries.

The firm has been in business for more than 60 years, most of those years as a division of Pfizer (PFE), the healthcare giant. Zoetis split from Pfizer in 2013.

Zoetis has grown its per-share profits every year since it became a publicly traded company in 2013. That growth trend should continue in 2016.

Per-share profits are expected to come in at $1.91 this year, up from $1.77 in 2015, on revenue of nearly $4.9 billion.

Results should benefit from continued solid performance in the US and improvement in some of its international markets. The strong earnings growth should translate to continued dividend hikes.

Zoetis trades at 27 times the consensus earnings estimate of $1.91 per share in 2016, and 22 times the 2017 estimate of $2.33.

Thus, these shares are not bargain basement and are vulnerable to weakness should the company’s earnings results disappoint. (The company announces third-quarter earnings November 2nd.)

Still, if the stock does sell off on earnings or because of an overall market correction, investors would do well to take advantage of the dip to buy.

Please note Zoetis offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company. Minimum initial investment is $500.

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By Chuck Carlson, Editor of DRIP Investor

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