Ackman has taken a roughly $2 billion stake in the company, according to the Wall Street Journal. The investor's Pershing Square Capital Management and the Sachem Head Capital Management hedge fund built the stake in Zoetis that amounts to about 10% of the company.
Ackman could reportedly urge Zoetis to sell itself to a large drug manufacturer such as Valeant Pharmaceuticals (VRX) , according to the paper.
Zoetis told the Journal that it received a call from Ackman about the investment, but declined to comment on the call.
TheStreet Ratings team rates ZOETIS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ZOETIS INC (ZTS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.8%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 26.92% and other important driving factors, this stock has surged by 26.99% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although ZTS had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- ZOETIS INC has improved earnings per share by 26.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ZOETIS INC turned its bottom line around by earning $1.01 versus -$0.02 in the prior year. This year, the market expects an improvement in earnings ($1.53 versus $1.01).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Pharmaceuticals industry average. The net income increased by 26.7% when compared to the same quarter one year prior, rising from $131.00 million to $166.00 million.
- The gross profit margin for ZOETIS INC is rather high; currently it is at 63.22%. Regardless of ZTS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.71% trails the industry average.
- You can view the full analysis from the report here: ZTS Ratings Report