Nomura Value Fund, a series of Delaware Group Equity Funds II on Zoetis Inc.
Thesis
Zoetis disappointed in the quarter as US companion-animal demand softened and management reduced full-year revenue and adjusted EPS guidance. The fund views the US weakness as cyclical rather than structural. International markets and the livestock segment remained solid, supporting the view that the company can eventually return to its growth trajectory. If that recovery materializes, the fund also expects scope for valuation multiple expansion.
“we believe the company’s challenges in the US market are cyclical”
Key risks
- Softer US companion-animal demand caused by fewer veterinary visits and macroeconomic pressure
- Increasing competition for key products