Morgan Stanley Downgrades Zoetis to EW from OW, Changes PT from $36.00 to NA

In a report published Wednesday, Morgan Stanley analyst Christopher Caponetti downgraded Zoetis, Inc. ZTS to Equal-weight from Overweight, changing its price target from $36.00 to NA. According to the report, the downgraded was the result low expectation for 2014 catalysts to drive outperformance. Revenue and EPS estimates remain unchanged for the company. “We are emphasizing Overweights on stocks with earnings upside potential, clear catalysts, and/or management teams with strong financial incentives to boost shares.,” the report said. “The potential for future M&A is a stronger part of the bull thesis for our recommended Specialty Pharma stocks. We believe industry consolidation will be a major driver of stock performance in Specialty Pharmaceuticals in 2014, and we believe stock outperformers will primarily include companies that take aggressive action.” Some highlights from the review included: -We rate ZTS Equal-weight relative to other stocks in our coverage universe. -ZTS is a global leader in animal health, and we expect mgmt. to deliver mid-teens EPS growth over the next few years. Some risks to ZTS include margin expansion fails to materialize, SAP implementation and new pharmacy entrants pressure ZTS margins. ZTS closed Tuesday at $32.10.