What happened
Shares of Zoetis (ZTS 1.17%) had a strong 2021 as the animal health company posted solid growth throughout the year and consistently raised its guidance. As a result, the stock finished the year up 47%, according to data from S&P Global Market Intelligence.
As you can see from the chart below, the stock got off to a slow start, but steadily gained from March onward, beating the S&P 500 handily.
^SPX data by YCharts.
So what
Zoetis shares slumped through the first two months of the year as a solid fourth-quarter 2020 earnings report wasn't enough to give the stock a boost. Revenue rose 8% to $1.81 billion, ahead of estimates at $1.73 billion, and its earnings per share (EPS) of $0.91 was better than the consensus at $0.87. The company also issued better-than-expected guidance for 2021, but the stock was essentially unchanged on the news.
Image source: Getty Images.
The stock hit bottom for the year on March 5 and then started to turn around with the help of several analyst upgrades, as a number of Wall Street watchers said the stock was undervalued.
Sales growth accelerated in the first quarter as it lapped weakness from the start of the pandemic. Revenue jumped 22% to $1.87 billion, which was ahead of estimates at $1.73 billion, while adjusted EPS jumped from $0.95 to $1.26, which also topped expectations at $1.03. The company also raised guidance for the full year, but the stock still fell 3.7% as investors may have expected a wider beat.
Over the next few months, the stock rose steadily, climbing with broader gains in the market. In its second-quarter earnings report in August, the company once again topped estimates and raised guidance, but the market again shrugged off the results.
In its final earnings report in November, the company delivered an encore performance, beating estimates and raising guidance, lifting the stock by about 3%.
Finally, in December, in a sign of strength, the company announced a $3.5 billion share buyback and said it would raise its dividend by 30% to $0.325 per quarter, which is a 0.6% yield at its current price.
Now what
Zoetis shares have pulled back by about 10% so far in 2022, in line with a broader pullback in growth stocks, but the long-term landscape looks promising. It's a leader in animal health, and spending on pets and pet care continues to grow, especially as members of Gen Z enter the market.
The stock has been a big winner since its 2013 initial public offering, up nearly 600%, and it should continue to outperform the market.
