Animal health leader Zoetis saw its stock plunge more than 20% on Thursday, hitting a seven-year low and marking the worst performance among S&P 500 components. Although the earnings figures were already disappointing, several analysts pointed out that the reality was even worse than it appeared.

Zoetis reported first-quarter revenue of $2.26 billion, up just 1.9% year-over-year and falling short of the market's expectation of $2.3 billion. Adjusted earnings per share came in at $1.53, also missing the projected range of $1.60 to $1.62. More concerning for investors was the company's decision to lower its full-year 2026 revenue guidance from $9.83–$10.03 billion to $9.68–$9.96 billion, and its EPS outlook from $7.00–$7.10 to $6.85–$7.00.

Stifel analyst Jonathan Block and his team noted that the quarter was worse than it looked. First, quarterly results were boosted by the early recognition of $100 million in revenue due to an international fiscal year adjustment. Excluding this factor, organic operational revenue actually saw a low single-digit decline.

Second, the core U.S. pet business deteriorated significantly. Revenue from U.S. operations fell 8% to $1.1 billion, with sales of companion animal products plummeting 11%, largely due to increased price sensitivity among pet owners and a decline in veterinary visits. Third, competition continued to intensify, with generic drugs already making a material impact on Zoetis's antibiotic Convenia and antiemetic Cerenia.

CEO Kristin Peck acknowledged that the operating environment in the first quarter was more challenging than expected, with pet owners displaying greater price sensitivity. William Blair analysts noted that even the lowered guidance appears to be a heavy lift, with no signs of macroeconomic improvement in sight. Year-to-date, the stock has fallen approximately 29%.