The pet care industry is witnessing remarkable growth driven by a surge in global pet adoptions and significant advancements in veterinary care. Concurrently, the increased investment by pet owners in care and accessories is expected to bolster strong growth prospects for the sector.
Given this backdrop, investors could consider loading up on shares of fundamentally sound pet care stocks Zoetis Inc. (ZTS), Chewy, Inc. (CHWY), and PetIQ, Inc. (PETQ) that seem well positioned to capitalize on the industry tailwinds.
In recent times, pet adoption has increased drastically, 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 at 33%.
Advancements in technology are also transforming veterinary medicine, leading to improved diagnostic capabilities, innovative treatment options, and enhanced medical devices. Innovations like telemedicine, digital imaging, minimally invasive surgeries, and advanced laboratory diagnostics have significantly upgraded the quality of animal care and broadened the scope of veterinary services.
According to a Grand View Research study, the U.S. veterinary medicine market is expected to grow at a CAGR of 6.8% from 2024 to 2030. This growth is projected to push the market to a substantial $21.80 billion, reflecting the increasing demand for advanced veterinary care.
Moreover, an increase in disposable income has further fueled higher pet ownership rates, prompting greater investment in pet care products like accessories, health items, and fashion. According to the Bureau of Economic Analysis data, disposable personal income rose by $54.8 billion or 0.3% in July 2024.
Looking forward, as per a report by Mordor Intelligence, the pet care market is expected to reach $24.59 billion by 2029, expanding at a CAGR of 4.2%.
Given these positive trends, let’s discuss the fundamentals of three pet-care stocks, starting with #3.
Stock #3: Zoetis Inc. (ZTS)
ZTS develops, manufactures, and commercializes medicines, vaccines, and diagnostic products and services for animal health. It operates in eight core species and seven major product categories, with products sold in 45 countries and over 100 countries. The company operates through two segments: United States and International.
On April 28, ZTS announced its definitive agreement with Phibro Animal Health Corporation (PAHC), a global leader in animal health and nutrition. As part of this deal, PAHC will acquire ZTS’ medicated feed additive (MFA) product portfolio, select water-soluble products, and related assets for around $350 million.
The transaction would allow ZTS to streamline its focus on core areas while unlocking capital for strategic growth opportunities.
For the fiscal 2024 second quarter that ended on June 30, 2024, ZTS’ revenue increased 8.3% year-over-year to $2.36 billion. Its non-GAAP gross profit grew 7.4% from the year-ago value to $1.69 million.
In addition, non-GAAP net income attributable to ZTS came in at $711 million or $1.56 per share, indicating a year-over-year growth of 9% and 10.6%, respectively.
Analysts expect ZTS’ revenue for the fiscal third quarter (ending September 2024) to increase 6.4% year-over-year to $2.29 billion. Meanwhile, its EPS for the same quarter is expected to grow 7.7% from the prior year’s period to $1.46. Furthermore, the company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
Shares of ZTS have surged 3.7% in the past month and 9% in the past three months to close the last trading session at $187.33.
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.
ZTS has a B grade for Quality and Stability. Within the Medical – Pharmaceuticals industry, the stock is ranked #39 out of 158 stocks.
Click here to access additional ZTS ratings for Sentiment, Momentum, Growth, and Value.
Stock #2: Chewy, Inc. (CHWY)
CHWY operates as a pure-play e-commerce business. It offers pet food, treats, supplies, and medications, along with other pet health products. The company also provides pet services for dogs, cats, fish, birds, small pets, horses, and reptiles. These are available through its retail websites and mobile applications.
For the fiscal 2024 second quarter ended on July 28, 2024, CHWY’s net sales increased 2.6% year-over-year to $2.86 billion. Its gross profit rose 7% from the year-ago value to $843.84 million. Additionally, the company’s adjusted EBITDA of $144.84 million indicates an increase of 64.3% from the prior year’s quarter.
Furthermore, the company’s adjusted net income and adjusted EPS came in at $104.79 million and $0.24, up 62.3% and 60% from the previous year’s period, respectively.
For the fiscal 2025 third quarter ending October 2024, CHWY’s revenue and EPS are expected to increase 4.2% and 49.9% year-over-year to $2.85 billion and $0.22, respectively. Moreover, the company topped the consensus EPS estimates in all four trailing quarters, which is impressive.
Shares of CHWY have gained 22.1% over the past three months and 53.3% over the past six months to close the trading session at $27.15.
CHWY’s sound fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CHWY has an A grade for Growth and a B grade for Quality and Sentiment.
Within the A-rated Consumer Goods industry, CHWY is ranked #15 among the 52 stocks.
In addition to the POWR Ratings we’ve stated above, we also have CHWY’s ratings for Stability, Value, and Momentum. Get all CHWY ratings here.
Stock #1: PetIQ, Inc. (PETQ)
PETQ is a pet medication and wellness company that offers veterinary products and services. The company’s Products segment distributes value-branded and third-party products for dogs and cats. Meanwhile, the Services segment offers diagnostic tests, vaccinations, and specialty medications.
On August 7, PETQ announced its acquisition by Bansk Group, a consumer-focused private investment firm. Bansk will acquire all outstanding shares of PETQ’s common stock at $31.00 per share, valuing the transaction at approximately $1.5 billion.
Cord Christensen, Founder, Chairman, and CEO of PETQ, stated that the Board considers this transaction a positive outcome for both the company and its stockholders.
On March 14, PETQ announced the launch of its new product, Minties® dental treats, designed for tiny/small, medium, and large-sized dogs, as well as cats. By continuously innovating and introducing new products to the pet-care market, the company is positioned to increase its popularity and expand its customer base.
PETQ’s total net sales increased 4.6% year-over-year to $328.94 million for the fiscal 2024 second quarter, which ended on July 30. Its gross profit rose 19.5% from the year-ago value to $88.28 million.
Moreover, the company’s operating income came in at $25.58 million, increasing 36.7% from the prior year's quarter. Plus, its adjusted EBITDA was reported to be $39.04 million, indicating an increase of 18.8% year-over-year.
In addition, the company’s adjusted net income came in at $24.42 million or $0.70 per share, up 82.2% and 52.2% from the prior year’s quarter, respectively.
The consensus revenue and EPS estimates of $1.16 billion and $1.56 for the fiscal year ending December 2024 exhibit a year-over-year rise of 4.9% and 25.6%, respectively. Moreover, the company has topped the consensus EPS estimates in all the four trailing quarters.
Shares of PETQ have gained 47.8% over the past three months and 81.8% over the past six months to close the trading session at $30.52.
PETQ’s solid fundamentals are echoed in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
PETQ has an A grade for Growth and a B for Value. It is ranked #19 out of 62 stocks in the Medical - Services industry.
Beyond what is stated above, we’ve also rated PETQ for Sentiment, Stability, Momentum, and Quality. Get all PETQ ratings here.
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ZTS shares were unchanged in premarket trading Thursday. Year-to-date, ZTS has declined -4.37%, versus a 16.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Pet Care Stocks With Tail-Wagging Potential StockNews.com
