Zoetis Inc. (NYSE:ZTS)

The financial leverage ratios demonstrate a consistent downward trend from 2019 to 2023, decreasing from 4.26 to 2.86. This indicates a reduction in the reliance on debt relative to equity, reflecting improved capital structure management over the period.

Debt to equity ratios show a declining pattern overall, dropping from 2.38 in 2019 to 1.32 in 2023. When including operating lease liabilities, the ratios follow a similar trend, decreasing from 2.45 to 1.36. This reduction suggests strengthened equity positions relative to debt obligations, which potentially decreases financial risk.

Debt to capital ratios decrease as well, falling from 0.70 to 0.57 between 2019 and 2023. Incorporating operating lease liabilities, the ratio moves from 0.71 to 0.58 over the same timeframe. These changes indicate a gradual shift toward a stronger capital base less dependent on debt financing.

Debt to assets ratios also decline from 0.56 in 2019 to 0.46 in 2023. Including operating lease liabilities, the ratio decreases from 0.58 to 0.48. This trend reflects a reduction in the proportion of assets financed through debt and lease liabilities, potentially improving asset coverage and firm stability.

Interest coverage ratios exhibit an upward trend, increasing from 9.08 in 2019 to 13.28 in 2023, indicating enhanced ability to meet interest obligations from operating earnings. Fixed charge coverage ratios similarly improve from 7.85 to 10.95 during the period, reinforcing the company's strengthening capacity to cover fixed financial charges beyond just interest, such as lease payments.

Overall, the data reveals a positive trajectory in financial health, with decreasing leverage and debt reliance, coupled with improving coverage ratios. This suggests an improving risk profile and enhanced capability to service debt and fixed charges over the five-year period.

Total debt

The total debt of the company exhibited fluctuations over the five-year period. Starting at 6,447 million USD in 2019, it increased to 7,199 million USD in 2020, subsequently decreased to 6,592 million USD in 2021, then rose again to 7,904 million USD in 2022, before falling to 6,576 million USD in 2023. This pattern indicates variability in debt management, with peaks in 2020 and 2022 and a general reduction by the final year observed.

Total equity

Total equity demonstrated a consistent upward trend throughout the period under review. Beginning at 2,708 million USD in 2019, equity rose each year, reaching 3,769 million USD in 2020, continuing to 4,543 million USD in 2021, followed by a slight decline to 4,405 million USD in 2022, and then increasing again to 4,997 million USD in 2023. Overall, the equity base strengthened, reflecting growth in shareholder value despite a minor setback in 2022.

Debt to equity ratio

The debt to equity ratio showed a general declining trend, indicative of improved leverage management. From a high of 2.38 in 2019, the ratio decreased to 1.91 in 2020, further dropped to 1.45 in 2021, then increased to 1.79 in 2022 before reaching the lowest point of 1.32 in 2023. This suggests that although total debt fluctuated, equity growth outpaced debt increases, leading to a gradual reduction in the company’s financial risk as measured by leverage.

Total Debt (Including Operating Lease Liability)

The total debt level demonstrated some fluctuations over the analyzed period. It increased from $6,646 million in 2019 to a peak of $8,133 million in 2022, followed by a notable decrease to $6,812 million in 2023. This pattern indicates a temporary increase in leverage during 2022, which was subsequently reduced by the end of 2023.

Total Equity

Equity showed a consistent upward trend throughout the period. It increased significantly from $2,708 million in 2019 to $4,997 million in 2023. This growth reflects strengthening shareholder value and an expanding equity base over the five-year span.

Debt to Equity Ratio (Including Operating Lease Liability)

This ratio decreased steadily from 2.45 in 2019 to 1.36 in 2023, indicating a reduction in financial leverage relative to equity. Although there was a slight rise in 2022 to 1.85, the overall trend points towards improved capital structure stability and reduced dependency on debt financing over time.

The analysis of the financial leverage indicators over the five-year period reveals several key trends and shifts in the company's capital structure.

Total Debt

The company's total debt exhibited fluctuations between 2019 and 2023. Beginning at 6,447 million USD in 2019, the debt level increased to 7,199 million USD in 2020. It subsequently declined to 6,592 million USD in 2021 before rising again to a peak of 7,904 million USD in 2022. In 2023, the total debt decreased notably to 6,576 million USD, nearing the initial levels observed in 2019. This pattern shows a non-linear movement with periods of both debt accumulation and reduction.

Total Capital

Total capital demonstrated a general upward trend throughout the examined years. Starting at 9,155 million USD in 2019, total capital increased steadily each year, reaching 10,968 million USD in 2020, 11,135 million USD in 2021, and peaking at 12,309 million USD in 2022. A slight decrease to 11,573 million USD was observed in 2023, yet the overall growth from 2019 remains clear. This indicates an expansion in the company’s capital base with a minor contraction in the final year.

Debt to Capital Ratio

The debt to capital ratio displayed a consistent declining trend over the period, moving from 0.70 in 2019 down to 0.57 in 2023. Despite intermittent increases in total debt, the proportion of debt in the company’s capital structure decreased. This reduction suggests an improvement in the company’s financial leverage by either increasing equity or reducing dependency on debt financing. The lowest ratio recorded was 0.57 in 2023, indicating a more conservative capital structure compared to prior years.

In summary, while total debt has fluctuated over the years, total capital has shown steady growth until a slight dip in the most recent year. The decreasing debt to capital ratio over the five-year period reflects a strategic move towards reduced leverage and potential enhancement in financial stability.

The analysis of the financial data over the five-year period reveals several notable trends in the company's capital structure and debt management.

Total Debt (including operating lease liability)

The total debt demonstrated fluctuations throughout the period. Beginning at $6,646 million in 2019, debt increased to $7,402 million in 2020, followed by a decline to $6,784 million in 2021. There was a rise again in 2022 reaching $8,133 million before falling to $6,812 million in 2023. Overall, the debt level experienced a degree of volatility, peaking in 2022.

Total Capital (including operating lease liability)

Total capital exhibited a general upward trajectory over the period. Starting at $9,354 million in 2019, it increased consistently each year with slight variations: $11,171 million in 2020, $11,327 million in 2021, peaking at $12,538 million in 2022 before a modest decrease to $11,809 million in 2023. This suggests the company expanded its capital base but faced an adjustment in the most recent year.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio showed a declining trend, indicating an improving capital structure with lower reliance on debt. It started relatively high at 0.71 in 2019, then decreased steadily to 0.66 in 2020 and 0.60 in 2021. There was a slight uptick to 0.65 in 2022, coinciding with the peak in total debt and capital, before falling again to its lowest point of 0.58 in 2023. This decline points to stronger solvency and potential risk reduction over time.

In summary, the company demonstrated a strategic trend toward reducing its leverage relative to total capital from 2019 through 2023, despite some fluctuations in absolute debt levels. The overall increase in capital combined with a decreasing debt-to-capital ratio suggests a more balanced and potentially lower-risk financial position by the end of the period.

Total Debt

From 2019 to 2020, total debt increased from approximately 6,447 million USD to 7,199 million USD, signaling an increase of about 11.7%. The debt level then decreased in 2021 to 6,592 million USD, followed by a rise in 2022 to 7,904 million USD. In 2023, total debt declined again to 6,576 million USD, reaching the lowest point in five years. This indicates a pattern of fluctuations, with no consistent upward or downward trend, but rather alternating periods of debt reduction and increase.

Total Assets

Total assets showed a generally upward trend over the period. Starting at 11,545 million USD in 2019, assets increased to 13,609 million USD in 2020 and further to 13,900 million USD in 2021. The growth continued in 2022 reaching a peak at 14,925 million USD before dropping slightly to 14,286 million USD in 2023. Overall, total assets expanded by about 23.7% over the five-year period, reflecting gradual asset growth with a minor decrease at the end of the period.

Debt to Assets Ratio

The debt to assets ratio displays fluctuations consistent with changes in both debt and asset values. It started at 0.56 in 2019, declined to 0.53 in 2020, then fell further to 0.47 in 2021, indicating lower leverage relative to assets. However, in 2022, the ratio increased back to 0.53 before declining again in 2023 to 0.46, which is the lowest ratio in the period. The overall trend points to a modest reduction in leverage over time, especially notable in the last two years, suggesting a strengthening balance sheet with lower reliance on debt financing relative to assets.

Total Debt (Including Operating Lease Liability)

The total debt showed fluctuations over the analyzed period. It increased from 6,646 million US dollars in 2019 to 7,402 million in 2020, followed by a decline to 6,784 million in 2021. In 2022, there was another increase to 8,133 million before it decreased again to 6,812 million in 2023. This volatility suggests periodic adjustments in the company's leverage or refinancing activities.

Total Assets

Total assets have experienced an overall upward trend from 11,545 million US dollars in 2019 to a peak of 14,925 million in 2022. In 2023, total assets slightly declined to 14,286 million but remained higher compared to the earlier years. This indicates the company expanded its asset base over the period with a minor contraction in the final year.

Debt to Assets Ratio (Including Operating Lease Liability)

The debt to assets ratio demonstrates a decreasing trend overall, beginning at 0.58 in 2019 and declining consistently to 0.48 by 2023, despite a temporary increase to 0.54 in 2022. This indicates a gradual improvement in the company’s capital structure, with the proportion of debt relative to assets diminishing over time, enhancing financial stability.

The financial data over the five-year period indicates several notable trends regarding the company’s asset base, equity, and leverage.

Total Assets

Total assets exhibited consistent growth from 2019 through 2022, increasing from 11,545 million US dollars to 14,925 million US dollars. However, in 2023, total assets experienced a slight decline, decreasing to 14,286 million US dollars. This suggests a general expansion in asset base with a recent contraction.

Total Equity

Equity showed a steady upward trend across all periods, rising from 2,708 million US dollars in 2019 to 4,997 million US dollars in 2023. The most significant annual increase occurred between 2019 and 2020, followed by continued but more moderate growth in subsequent years. This reflects strengthening shareholder equity and retained earnings over time.

Financial Leverage

The financial leverage ratio decreased consistently from 4.26 in 2019 to 2.86 in 2023, indicating a gradual reduction in reliance on debt financing relative to equity. The decline in leverage suggests an improved equity cushion relative to total assets and a potential decrease in financial risk.

Overall, the data highlights a trend of increasing equity and decreasing financial leverage, suggesting enhanced financial stability. Despite a minor reduction in total assets in the last period, the firm appears to be strengthening its capital structure, potentially improving its risk profile and financial flexibility.

Earnings before interest and tax (EBIT)

The EBIT shows a consistent upward trend over the five-year period. Starting at 2024 million US dollars in 2019, it increased steadily each year to reach 3175 million US dollars by 2023. This reflects ongoing growth in operating profitability.

Interest expense, net of capitalized interest

The interest expense remains relatively stable, fluctuating slightly but without any significant directional trend. It was 223 million US dollars in 2019 and ended marginally higher at 239 million US dollars in 2023, indicating controlled financing costs.

Interest coverage ratio

The interest coverage ratio, which measures the ability to cover interest expenses with EBIT, exhibits a positive trend, improving from 9.08 in 2019 to 13.28 in 2023. This increase suggests enhanced capacity to meet interest obligations, likely supported by the growth in EBIT and stable interest expenses.

Earnings before fixed charges and tax

The earnings before fixed charges and tax show a consistent upward trend over the five-year period. Starting from 2,064 million US dollars in 2019, there is a steady increase each year, reaching 3,231 million US dollars by the end of 2023. This represents a notable growth in earnings, reflecting increased profitability or operational efficiency over time.

Fixed charges

Fixed charges have remained relatively stable throughout the period, with minor fluctuations. The values range from 263 million US dollars in 2019 to 295 million US dollars in 2023, indicating a slight increase over the years. This stability suggests controlled fixed financial obligations despite the company's growing earnings.

Fixed charge coverage

The fixed charge coverage ratio exhibits an improving trend, rising from 7.85 in 2019 to 10.95 in 2023. This increasing ratio signals enhanced ability to cover fixed charges with earnings before fixed charges and tax, indicating improved financial health and reduced risk related to fixed financial commitments. Notably, the most significant gains appear from 2020 onwards, highlighting strengthening financial resilience.