We spend a lot of money on our pets. According to a report by Grand View Research, the global animal healthcare market totaled nearly $59 billion in 2022 and is expected to grow at an 8.8% compound annual rate from 2023 to 2030, reaching a $112 billion market by 2030.
While the number of adopted pets grew during the height of the COVID-19 pandemic, the number of pet owners has remained relatively stable since then. The American Pet Products Association estimates that 86.9 million households in the U.S., 66% of the total, own one pet or more.
Over the past decade, spending on veterinary care has tripled in the United States. The growth in that spending makes veterinary care stocks somewhat recession proof. More and more, spending on pet healthcare is seen as something people need rather than want.
Two of the biggest names in veterinary care stocks are Idexx Laboratories (IDXX -0.30%) and Zoetis (ZTS -4.32%), international companies that have seen their shares rise by more than 18% this year. Let's see if either one makes sense for investors now.
Idexx should see more revenue, EPS growth in 2023
Idexx Laboratories makes veterinary diagnostic tools, lab tests, and software for veterinary practice management. It also does water testing, diagnostic healthcare tests for humans, and helps monitor the quality of milk and wildstock health. The company has customers in more than 175 countries and roughly 10,300 employees.
The biggest segment for Idexx is its companion animal group (CAG) segment, which includes all of its products related to pet care -- everything from tools for analyzing blood and fecal tests to veterinary practice management software. The company's stock is up more than 18% so far this year, thanks in part to strong earnings.
Idexx reported fourth-quarter revenue of $829 million, up 3% year over year, and earnings per share (EPS) of $2.05, up 8% over the fourth quarter of 2021. For the year, the company saw revenue of $3.4 billion, up 5%.
That was led by growth in the CAG diagnostics segment, which saw sales rise 4.1% year over year to $642.7 million in the quarter. Within that segment, veterinary software services and diagnostic imaging systems grew 15%. Yearly revenue for the segment was $3.1 billion, up 5.8%. The company's software has been a big driver of revenue because it is subscription based and brings in repeat revenue.
Full-year EPS was $8.03, down 7%, which the company attributed to $80 million spent in the second quarter on research and development.
The company said it is looking for growth in revenue and EPS in 2023, with revenue guidance showing a rise of 6.5% to 9.5% to a range of $3.6 billion to $3.7 billion and EPS between $9.27 to $9.75, an increase of 16% to 21%.
Zoetis: A to Z in pet care
Zoetis makes medicines for pets and livestock and diagnostic systems for animal treatment. It has been in business for more than 70 years and has roughly 13,800 employees. Its stock is up slightly more than 18% so far this year.
The company reported fourth-quarter revenue of $2 billion, up 4% year over year, and EPS of $0.99, up 11% over the same period. For the year, Zoetis reported revenue of $8.1 billion, up 4%, and $4.49 in EPS, up 4%.
Like Idexx, the company anticipates continued growth this year, with revenue between $8.575 and $8.725 billion, up 5.8% to 7.7%, and EPS stretching to $5.34 to $5.44, an increase of 18.9% to 21.1%. One area where Zoetis sees stronger growth is overseas as the rate of pet adoption increases in emerging markets.
Zoetis' growth is impressive, but less so over the past decade when compared to Idexx although both companies have triple-digit-percentage growth in EPS. Zoetis has been on a bit of a buying spree of late and that has put it more into competition with Idexx, in some cases, particularly in terms of diagnostic equipment. Over the past five years, Zoetis has bought 13 companies, the most recent being a buyout of private veterinary medicine maker Jurox last year for an undisclosed amount.
Zoetis has one edge over Idexx in that it offers a quarterly dividend, which it raised by 15.1% this year to $0.38 per share, the sixth consecutive year it has increased its dividend. The yield is 0.87%, below the S&P 500's 1.74% payout.
