With the recent growth in pet adoption worldwide and rapid technological transformations, the pet care industry is experiencing rapid expansion. Increased investment on pet care and accessories by pet owners has resulted in a strong growth prospect for the industry.
Given this backdrop, investors could consider watching fundamentally sound pet care stocks Zoetis Inc. (ZTS), IDEXX Laboratories, Inc. (IDXX), and Chewy, Inc. (CHWY).
In recent times, pet adoption has soared drastically, especially during the pandemic, and the trend continues. A substantial number of American households own a pet, with dogs being the most popular. Pet ownership is increasing particularly amongst young generations, with millennials having the highest share of pet owners of 33%.
With rising pet ownership and a surge in personal disposable incomes, investment in pet care products such as accessories, pet health, and pet fashion is also increasing, leading to significant growth in the pet care market. The pet care market is expected to reach $24.59 billion by 2029, expanding at a CAGR of 4.2%.
Further, propelled by increasing pet adoption, technological advancements, and rising access to e-commerce platforms, the global pet care e-commerce market is projected to grow at a CAGR of 7.6%, resulting in a market volume of $149.21 billion by 2030.
Given the robust economic outlook, watching quality pet care stocks such as ZTS, IDXX, and CHWY could be worth it.
Zoetis Inc. (ZTS)
ZTS is engaged in the discovery, development, manufacture, and commercialization of animal health medicines, vaccines, and diagnostic products and services internationally. The company commercializes products primarily in species, including livestock.
On May 22, ZTS’ Board of Directors declared a dividend of $0.43 per share for the third quarter of 2024. The dividend will be paid on September 4, 2024, to all holders of record of its common stock as of the close of business on Thursday, July 18, 2024.
ZTS pays an annual dividend of $1.73, which translates to a yield of 0.96% at the current share price. Its four-year average dividend yield is 0.68%. Moreover, the company’s dividend payouts have increased at a CAGR of 22% over the past five years. ZTS has raised its dividends for five consecutive years.
ZTS’ revenue for the first quarter that ended March 31, 2024, increased 9.5% year-over-year to $2.19 billion. Its adjusted gross profit grew 9.3% from the year-ago value to $1.55 billion. Adjusted net income and EPS attributable to Zoetis came in at $634 million and $1.38, up 4.4% and 5.3% from the prior year’s quarter, respectively.
Analysts expect ZTS’ revenue for the second quarter (ended June 2024) to grow 6% year-over-year to $2.31 billion. The company’s EPS is expected to increase 5.2% year-over-year to $1.48 for the same quarter. Furthermore, the company topped the consensus revenue and EPS estimates in all of the trailing four quarters.
Shares of ZTS have surged 4.9% over the past month and 4.8% over the past year to close the last trading session at $179.23.
ZTS’ bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Quality and Stability. Within the Medical - Pharmaceuticals industry, ZTS is ranked #34 out of 153 stocks.
Click here to access additional ratings of ZTS for Sentiment, Momentum, Growth, and Value.
IDEXX Laboratories, Inc. (IDXX)
IDXX develops, manufactures, and distributes products primarily for the companion animal veterinary, livestock and poultry, dairy, and water testing markets internationally. The company operates in three segments: Companion Animal Group; Water Quality Products; and Livestock, Poultry and Dairy.
On June 4, IDXX launched the Catalyst Pancreatic Lipase Test, a single-slide solution for dogs and cats suspected of pancreatitis. With the help of the Catalyst analyzers, the tests are streamlined for quicker diagnosis and improved patient results.
The test are set to launch in the U.S. and Canada initially in this September, with further plans for a global rollout to over 70,000 catalyst installed bases starting in the fourth quarter of 2024.
IDXX’s revenue increased 7.1% year-over-year to $964.10 million during the first quarter that ended March 31, 2024. Net income attributable to stockholders and EPS came in at $235.58 million and $2.81, indicating increases of 10.1% and 10.2% from the prior year’s quarter, respectively.
In addition, the company’s free cash flow rose 16.6% from the year-ago value to 168.31 million.
Street expects IDXX’s revenue and EPS for the second quarter (ended June 2024) to increase 6.4% and 7.6% year-over-year to $1 billion and $2.87, respectively. Also, the company has topped the consensus EPS estimate in all four trailing quarters, which is remarkable.
Shares of IDXX have surged 10% over the past nine months to close the last trading session at $470.74.
IDXX’s POWR Ratings reflect its sound fundamentals. IDXX has an A grade for Quality. It is ranked #38 out of 134 stocks in the Medical – Devices & Equipment industry.
In addition to the POWR Ratings we’ve stated above, we also have IDXX ratings for Momentum, Value, Sentiment, Growth, and Stability. Get all IDXX ratings here.
Chewy, Inc. (CHWY)
CHWY engages in the pure play e-commerce business. The company provides pet food and treats, pet supplies and pet medications, and other pet-health products, and pet services for dogs, cats, fish, birds, small pets, horses, and reptiles via its retail websites and mobile applications.
In terms of forward non-GAAP PEG, CHWY is trading at 0.24x, 84.3% lower than the industry average of 1.54x. Likewise, the stock’s forward EV/Sales multiple of 0.91 is 25.4% lower than the industry average of 1.22.
For the first quarter ended on April 28, 2024, CHWY’s net sales increased 3.1% year-over-year to $2.88 billion, and its gross profit rose 7.7% from the year-ago value to $853.99 million. The company’s adjusted EBITDA of $162.92 million indicates increase 46.9% from the prior year’s quarter.
In addition, the company’s adjusted net income and adjusted EPS came in at $137.06 million and $0.31, up 55.9% and 55% from the prior year’s quarter, respectively.
Analysts expect CHWY’s revenue for the second quarter (ending July 2024) to increase 2.8% year-over-year to $2.85 billion and its EPS for the ongoing quarter is expected to grow 33.6% year-over-year to $0.20. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
CHWY’s shares have gained 32.9% over the past six months to close the last trading session at $25.90.
CHWY’s sound fundamentals are reflected in its POWR Ratings. The stock has a B grade for Quality, and Sentiment. Within the B-rated Consumer Goods industry, CHWY is ranked #23 among the 52 stocks.
In addition to the POWR Ratings we’ve stated above, we also have CHWY’s ratings for Stability, Growth, Value, and Momentum. Get all CHWY ratings here.
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ZTS shares were trading at $178.14 per share on Friday afternoon, down $1.09 (-0.61%). Year-to-date, ZTS has declined -9.06%, versus a 16.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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