Looking For A Better Entry Point, BMO Downgrades Zoetis Shares
“Although we expect a good 2Q17, we doubt it will meaningfully change the company's long-term growth prospects. With consensus estimates rising to meet ours, ZTS seems like a crowded long. While we recognize potential upside drivers, at these levels, we believe they are balanced by downside risk,” said Arfaei.
3 Key Takeaways
- In 2016, BMO viewed Zoetis as a company with a very durable and resilient business. However, Arfaei no longer sees this as a case and believes BMO’s 2016 theses has materialized.
- While BMO still expects Zoetis to have a solid Q2 report, Arfaei does not believe it will have a large enough impact on its long-term theses.
- Arfaei sees a very balanced risk/reward opportunity with Zoetis.
Potential Rewards: Better-than-expected U.S. livestock recovery, growth in emerging markets, and U.S. tax reform.
Potential Risks: Slower-than-expected U.S. livestock recovery, Zoetis could struggle entering into emerging markets, the emergence of antibiotic-resistant bacteria.
Year to date, Zoetis is up 16 percent.
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