Zoetis Announces $500 Million Buyback as Activists Circle

Zoetis Inc., the animal health company activist investors are pressuring to boost shareholder returns, issued a 2015 financial forecast below analyst expectations after saying earlier today it will buy back $500 million in shares.

Excluding one-time items, earnings next year will be $1.61 to $1.68 a share, below Bloomberg’s $1.72 a share average of analyst estimates. Sales will be from $4.85 billion to $4.95 billion, the company said in a filing. Analysts had estimated $4.95 billion.

Zoetis, which makes drugs for pets and livestock, is under pressure from two activist hedge funds. Bill Ackman’s Pershing Square Capital Management LP and Sachem Head Capital Management LP have taken a 10 percent stake in Zoetis, though they haven’t yet said what they want the company to do. That could include selling itself, buybacks or dividends, or something else.

Zoetis shares fell less than 1 percent to $44.19 at 4 p.m. New York time.

The buyback announced today amounts to 2.3 percent of Zoetis’s $22.2 billion market value. It “gives us additional flexibility to return capital to shareholders when it is not needed in the business,” Chief Financial Officer Paul Herendeen said in a statement. The buybacks can be done on the open market, or through “privately negotiated transactions,” Zoetis said.

Yesterday, the Florham Park, New Jersey-based company announced a deal to buy animal health assets from Abbott Laboratories for $255 million. Zoetis plans to keep doing deals to buy assets, the company has said, and on Nov. 14, it adopted a poison-pill shareholder plan to block a potential takeover.

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