Zoetis (ZTS) shares plummeted 5.04% in Tuesday's trading session, despite the animal health company reporting better-than-expected first-quarter results and raising its full-year guidance. The sharp decline comes as investors appear to be focusing on potential headwinds from tariffs and global trade tensions, overshadowing the company's strong financial performance.

The company reported Q1 adjusted earnings per share of $1.48, surpassing the analyst consensus estimate of $1.39. Revenue also beat expectations, coming in at $2.22 billion compared to the projected $2.19 billion. Following the earnings announcement, Zoetis raised its full-year 2025 outlook, now expecting adjusted EPS between $6.20 and $6.30 and revenue in the range of $9.425 billion to $9.575 billion.

However, the positive results were overshadowed by concerns about the impact of tariffs on Zoetis's business. During the earnings call, company executives revealed that tariffs, net of mitigations, are expected to have a $20 million headwind impact. Additionally, Zoetis expressed concerns about potential retaliatory tariffs from other jurisdictions, particularly Europe. These factors seem to have spooked investors, leading to the significant stock decline despite the company's strong financial performance and improved guidance.