NEW YORK (TheStreet) -- Zoetis (ZTS) shares are down 0.5% to $44 on Tuesday after the animal health medicine and vaccine manufacturer announced its $500 million share buyback program before the opening bell today.
This announcement comes one day after the company announced that it was purchasing a portfolio of drugs from Abbott Laboratories (ABT) for $255 million, and both moves come in the wake of activist investor Bill Ackman's revelation of a $2 billion, 8.5%, stake in the company.
The company adopted a poison pill shareholder plan on Friday following Ackman's announcement, designed to insulate it against any activism on his part. "The plan is intended to protect shareholders and the company from any attempt to take control of the company that the board of directors determines is not in the best interest of shareholders and does not reflect the company's unique industry position and long term value. It is also designed to provide the board sufficient time to make fully informed decisions in response to any open market or other accumulation of share," the company said.
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 also find weaknesses including generally higher debt management risk and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.7%. Since the same quarter one year prior, revenues slightly increased by 9.5%. 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 36.31% 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.
- The gross profit margin for ZOETIS INC is rather high; currently it is at 67.54%. 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 13.64% trails the industry average.
- Net operating cash flow has declined marginally to $103.00 million or 9.64% when compared to the same quarter last year. Despite a decrease in cash flow ZOETIS INC is still fairing well by exceeding its industry average cash flow growth rate of -19.99%.
- The debt-to-equity ratio is very high at 2.68 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, ZTS has managed to keep a strong quick ratio of 1.66, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: ZTS Ratings Report