Should You Buy Zoetis Before Feb. 12?

Zoetis (NYSE: ZTS) tanked after its November earnings release. Will history repeat itself pre-market on Feb. 12, when the animal healthcare company releases results for the fourth quarter of 2025? That's the question on the minds of many investors, less than a week before its earnings report hits the street.

Whether the stock rallies after earnings or falls further afterward may depend on how closely the guidance updates align with current expectations. Fortunately for Zoetis, with expectations already walked back last quarter, it may not take much to surprise investors positively, leading to a bullish response.

That said, if you are approaching this stock as a possible long-term investment, you likely do not need to leap into a Zoetis position today. Shares may have more room to fall before bottoming out.

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Zoetis earnings preview

Zoetis is scheduled to post earnings for the fourth quarter and full year 2025 on Feb. 12. The latest sell-side forecasts call for $2.36 billion in revenue and earnings of around $1.40 per share. This represents year-over-year revenue growth of 1.9% and flat earnings.

That said, in each of the last four quarters, Zoetis has beaten on earnings. After last quarter's lackluster guidance, walked-back expectations could set the stage for an even greater earnings beat, and perhaps even a revenue beat. The company's Q3 2025 top line fell slightly short of expectations.

Nevertheless, irrespective of whether Zoetis meets, beats, or falls short of consensus earnings per share (EPS), there's still the risk investors will react negatively to the outlook once again. Last quarter, the company lowered its full-year 2025 revenue guidance, citing macro trends impacting its livestock business.

If these negative trends persist and lead to disappointing full-year 2026 guidance, investors may bail on Zoetis, as they did after the previous earnings release last November. Zoetis still hasn't fully recovered, and is down 11% since its Q3 report.

The best approach for long-term investors

Long-term prospects for Zoetis remain promising. The company is a leader in its industry, and despite recent troubles, has a more than decade-long track record of steady earnings and dividend growth. However, amid challenges, including headwinds related to Librela and Solensia, its osteoarthritis treatments for dogs and cats, shares have experienced valuation compression.

A year ago, shares were trading for nearly 30 times forward earnings. Today, the stock trades for less than 20 times forward earnings. Although more reasonably priced than before, Zoetis could remain at risk of further valuation compression until concerns about future growth fade.

The stock now trades at a valuation discount to competitor Elanco Animal Health, which trades for 23 times forward earnings. With this in mind, it's possible that Zoetis, if results and guidance reveal positive surprises, could finally emerge from its extended slump.

That said, I'm not suggesting one needs to dive in before earnings to wager on a near-term surge. Instead, waiting until after earnings may be the best approach, from a long-term perspective. If Zoetis once again disappoints, the opportunity to enter a position at an even lower price could emerge. Even if Zoetis beats expectations, it's unlikely to immediately close its valuation gap.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zoetis. The Motley Fool has a disclosure policy.