Pandemic Pets Push Industry Stocks to Pricey Valuations
2020年10月14日 - 6:59PM
Dow Jones News
By Veronica Dagher
The pet business has been among the great beneficiaries of the
new coronavirus. That success has made some stocks in the sector
expensive.
Among the sector's big winners this year are veterinary services
firm Idexx Laboratories, up about 61% this year, and drug company
Zoetis Inc., which is 25% higher. The S&P 500 is up 8.7% for
2020. Investors will get a closer look at the companies in the
coming weeks: Idexx is due to report third-quarter results Oct. 29,
while Zoetis is due to report its results Nov. 5.
The pandemic has been accompanied by an uptick in pet ownership.
A corresponding rise in the use of medicine and diagnostic tests
for pandemic puppies and other pets is boosting revenue at
animal-health companies. As working-from-home arrangements become
more permanent for some, workers have more time to care for
pets.
Michael Ryskin, an equity analyst at Bank of America, said he
believes these trends will amount to a multiyear tailwind for the
animal-health industry.
"The pet, or 'companion animal' industry, has been incredibly
strong and resilient for many years, and despite fear of a negative
impact from Covid-19, is having another strong year in 2020," he
said.
This quarter Mr. Ryskin said he would be watching for whether
the economic recession is curtailing some pet owners' spending,
though he doesn't expect that to be the case.
Given the strength of the companies' stocks, investors will have
to consider the risk of buying shares that trade at a premium to
the rest of the market.
Shares of Zoetis, are trading at about 40 times estimated 2021
earnings, said Jefferies analyst David Steinberg. Idexx trades at
about 62 times 2021 expected earnings, Mr. Ryskin said. The S&P
500 trades at about 26 times expected earnings over the next 12
months, according to FactSet.
Mr. Steinberg said strong initial sales and the potential of
Zoetis's Simparica Trio medicine, which protects animals against
heartworm and other diseases, help justify the valuation. The
company's highly anticipated feline-pain medication, which is
expected to launch sometime in 2021, is another revenue driver to
watch, he said.
Write to Veronica Dagher at veronica.dagher@wsj.com
(END) Dow Jones Newswires
October 14, 2020 05:44 ET (09:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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