What happened

Shares of Zoetis (ZTS 0.98%) were falling today after the animal pharmaceutical company posted disappointing results in its third-quarter earnings report, missing the mark on both top and bottom lines, and lowered its guidance for the year.

The stock closed this Thursday afternoon down 11%.

So what

Revenue in Q3 grew just 1%, or 5% in constant currency, to $2 billion, which was below estimates at $2.09 billion.

Management cited challenges with supply chain, labor shortages, and currency headwinds due to the stronger dollar.

On the bottom line, adjusted earnings per share fell slightly from $1.25 to $1.21, missing estimates at $1.25. Adjusting for currency exchange, net income was up 2%, and a lower tax rate in the year-ago quarter also impacted results.

CEO Kristin Peck said,

As the world continues to face dynamic market conditions and uncertainty in the global economy, our business has been tested and continues to perform well based on our diverse, durable product portfolio and global scale.

She also said the company was lowering its full-year guidance due to supply chain and labor challenges, though she remains confident in the long-term growth of the business.

Now what

Looking ahead, the company dialed down its guidance for the year, calling for revenue of $8 billion to $8.08 billion, down from a previous range of $8.225 billion to $8.325 billion. It also cut its adjusted earnings-per-share guidance from $4.97 to $5.05 to $4.83 to $4.90. 

Despite the weakness, the company continues to invest in new products like monoclonal antibodies for osteoarthritis in cats and dogs. 

With the secular growth expected to continue in the pet industry, Zoetis remains in a strong position to capture that growth given its leadership in animal pharmaceuticals. Still, given the short-term headwinds, the stock deserves to pull back on the report.