Zoetis Inc. (NYSE:ZTS)

The financial ratios analyzed over multiple quarterly periods exhibit noteworthy trends in the company's capital structure and financial stability.

Debt to Equity Ratio

This ratio shows a steady decline from 2.78 in March 2019 to about 1.30 in March 2024, indicating a gradual reduction in reliance on debt relative to equity. Despite some fluctuations, the overall trend points to an improved equity base or reduced debt levels. Including operating lease liabilities follows a nearly identical pattern, with similarly declining values reflecting the company's consistent efforts to lower leverage when such obligations are considered.

Debt to Capital Ratio

The debt to capital ratio exhibits a gently decreasing trend, from 0.74 in early 2019 to approximately 0.57 by March 2024. This indicates a slight reduction in debt proportion within the company's overall capital structure. The inclusion of operating lease liabilities produces only marginally higher ratios but follows the same downward trend, reinforcing the observation of moderated leverage over time.

Debt to Assets Ratio

This ratio declined from around 0.59 in early 2019 to about 0.46 in early 2024, signaling that the share of assets financed through debt has decreased. The ratio including operating lease liabilities remains slightly higher but shows a matching downward trend, suggesting more conservative asset financing strategies and potentially improved asset management or equity financing.

Financial Leverage

Financial leverage ratios have dropped significantly from 4.7 in Q1 2019 to 2.84 in Q1 2024, reflecting a reduction in the extent to which assets are financed through debt. This decrease aligns with the trends observed in debt-to-equity and debt-to-assets ratios, suggesting enhanced financial stability and a less risky capital structure over the five-year span.

Interest Coverage Ratio

Interest coverage ratios, available from late 2019 onwards, show a robust and steadily increasing trend, rising from about 9.08 to 13.76 by Q1 2024. This indicates a strengthening ability to meet interest obligations from earnings, signifying improved profitability and lower financial risk, despite ongoing debt levels.

In summary, the company demonstrates a clear pattern of reducing leverage through diminished debt relative to equity, capital, and assets. Concurrently, improving interest coverage ratios suggest enhanced earnings strength and capacity to service debt. These trends point toward an overall strengthening of the financial position and potentially greater resilience against financial stress in the observed quarters.

Total debt

The total debt remained relatively stable around the 6,400 to 6,500 million US dollar range between March 2019 and March 2020. A notable increase occurred in the second quarter of 2020, rising sharply from 6,463 to 7,695 million US dollars. After this peak, debt levels fluctuated moderately, generally hovering in the range between 6,550 and 7,900 million US dollars through the end of 2023. No clear long-term upward or downward trend is evident, but there was a temporary peak in late 2020 and early 2021 followed by a stabilization.

Total equity

Total equity showed a consistent upward trajectory throughout the entire period. Starting at 2,317 million US dollars in March 2019, equity increased steadily each quarter, reaching 5,058 million US dollars by March 2024. This represents a more than doubling of equity over the five-year span, indicating ongoing capital growth and potentially retained earnings accumulation. Minor fluctuations were observed in some quarters, particularly in late 2021 and late 2022, but the overall trend points to substantial equity strength improvement.

Debt to equity ratio

The debt to equity ratio demonstrates a marked decline over the full period, reflecting a significant reduction in leverage. Starting at a high ratio of 2.78 in March 2019, the ratio steadily decreased quarter by quarter, falling below 1.5 by the end of 2021. This decline continued with minor fluctuations and occasional slight rises, reaching a low point of approximately 1.29 near the end of 2023. The ratio stabilized around 1.3 by March 2024. This trend suggests a strategic focus on strengthening equity relative to debt, improving financial stability and reducing financial risk.

Summary insights

Overall, the data reveals strong equity growth outpacing relatively stable total debt levels, which caused a pronounced decrease in the debt to equity ratio. The initial surge in debt during mid-2020 appears temporary and was followed by a corrective stabilization. Meanwhile, steady equity growth points to robust profitability or capital retention. The reduction in leverage improves the company’s balance sheet quality, potentially enhancing creditworthiness and financial flexibility.

Total debt (including operating lease liability)

The total debt remained relatively stable from March 2019 through March 2020, fluctuating narrowly around the 6,600-6,600 million US dollar range. A notable increase occurred in the second quarter of 2020, reaching approximately 7,850 million US dollars, followed by some volatility but overall a higher baseline compared to prior quarters. By the end of 2022, total debt peaked near 8,090 million US dollars, then returned to levels around 6,700 million US dollars from the first quarter of 2023 onward, maintaining relative consistency through the first quarter of 2024.

Total equity

Total equity exhibited an overall upward trend from March 2019 to the fourth quarter of 2021, increasing from about 2,300 million US dollars to over 4,500 million US dollars. This positive trajectory paused in 2022, with equity fluctuating in the range of approximately 4,400 to 4,600 million US dollars. Early 2023 marked continued growth in equity, reaching a peak exceeding 5,000 million US dollars, before experiencing a slight decline and stabilization around the 5,000 million US dollar mark through the first quarter of 2024.

Debt to equity ratio (including operating lease liability)

The debt to equity ratio generally trended downward between March 2019 and the third quarter of 2021, indicating a relative improvement in the company’s equity position compared to its debt levels. The ratio decreased from approximately 2.84 to a low near 1.33. However, this improvement was interrupted in 2022 when the ratio climbed to around 1.84, reflecting a relative increase in debt compared to equity. Subsequently, the ratio declined again in late 2022 and into 2023, stabilizing around 1.3 to 1.35 in the most recent quarters, which still reflects a significant reduction from earlier years.

The financial data over the analyzed periods reveals several key trends regarding the company's debt levels, total capital structure, and leverage ratios.

Total Debt

Total debt exhibited relative stability from March 2019 through March 2020, hovering around approximately 6,444 to 6,463 million US dollars. A notable increase occurred in the second quarter of 2020, rising sharply to 7,695 million US dollars and maintaining elevated levels above 7,000 million through the end of 2020. Following this peak, debt levels declined gradually during 2021, dropping below 6,600 million US dollars by the fourth quarter.

In 2022, total debt remained fairly steady around the mid-6,500 million mark until a considerable rise occurred again at the end of 2022, peaking at 7,904 million US dollars in the fourth quarter. After this spike, debt levels reverted to roughly 6,560 million through the first quarter of 2024, indicating a pattern of episodic increases followed by correction.

Total Capital

Total capital showed a generally upward trajectory throughout the period under review. Starting at 8,761 million US dollars in the first quarter of 2019, total capital consistently increased with some fluctuations, peaking at 12,309 million US dollars in the fourth quarter of 2022. This suggests ongoing capital growth, likely driven by a combination of equity and retained earnings, as well as debt financing.

Although total capital slightly receded in the subsequent quarters of 2023, it remained elevated compared to earlier years, closing near 11,644 million US dollars by the first quarter of 2024, evidencing sustained expansion of the company’s capital base.

Debt to Capital Ratio

The debt to capital ratio demonstrates a downward trend from 0.74 in March 2019 to approximately 0.56 in the third quarter of 2023, indicating a reduction in leverage relative to the capital base. This declining ratio suggests that total capital has grown at a faster rate than debt or that debt has been managed downward relative to capital.

However, the ratio showed some volatility, particularly coinciding with the periods of sharp debt increase, such as in mid-2020 and late 2022. During these intervals, the ratio temporarily increased, reaching around 0.64 in the fourth quarter of 2022, before declining again. This pattern implies that while debt spikes occurred intermittently, the company predominantly maintained a strategy oriented toward reducing or stabilizing leverage in relation to capital.

Overall, the leverage ratio indicates a careful balancing act between utilizing debt and expanding capital to sustain financial structure without excessive reliance on debt financing.

Total Debt (Including Operating Lease Liability)

The total debt remained relatively stable from March 2019 through March 2020, fluctuating slightly around the 6,600 to 6,600 million USD range. A notable increase occurred in June and September 2020, with total debt rising to approximately 7,850 and 7,863 million USD respectively. Following this peak, there was a decrease maintaining around 6,700 million USD through early 2022. In the last two years, debt figures demonstrated some volatility, spiking again to over 8,000 million USD by December 2022, then stabilizing back near 6,700 million USD by the end of 2023 and early 2024. Overall, the debt levels show periods of increase followed by stabilization without clear long-term upward or downward trends.

Total Capital (Including Operating Lease Liability)

Total capital grew steadily from approximately 8,900 million USD in early 2019 to a peak near 12,495 million USD in December 2022. The upward trend reflects a gradual accumulation of resources or financing over the nearly five-year span. After the peak in late 2022, the total capital slightly decreased but remained above 11,700 million USD during 2023 and early 2024. This trend signals an overall expansion of the company’s capital base despite some fluctuations in the final periods observed.

Debt to Capital Ratio (Including Operating Lease Liability)

The debt to capital ratio consistently declined from 0.74 in March 2019 to a low of approximately 0.57 by the end of 2023 and early 2024. This steady decrease indicates a reduction in relative leverage, suggesting the company has been reducing its debt burden relative to its total capital. The ratio showed a more pronounced drop during 2020 and 2021, descending from the early 0.70s level to below 0.60 by late 2021, and remained relatively stable around the 0.57 to 0.60 range thereafter. This pattern reflects improved financial stability with lower reliance on debt financing compared to total capital over time.

Total Debt

The total debt shows a generally stable pattern with some fluctuations over the analyzed periods. Starting at approximately $6.44 billion in early 2019, the debt remained relatively steady around this level until mid-2020, when it increased to nearly $7.7 billion. Following this peak, debt decreased slightly towards the end of 2020 and continued to fluctuate around $6.5 to $6.6 billion in subsequent years. There was a notable increase again at the end of 2022 to nearly $7.9 billion, but this was followed by a return to previous levels around $6.5 billion through 2024.

Total Assets

The total assets trend demonstrates steady growth over the period. Assets increased from approximately $10.9 billion in early 2019 to nearly $13.7 billion by the end of 2020. After some moderate fluctuations, assets continued a gradual upward trend, reaching approximately $14.3 billion by the first quarter of 2024. This overall growth indicates an expansion of the company's asset base during the analyzed timeframe.

Debt to Assets Ratio

The debt to assets ratio shows a declining trend from 0.59 in early 2019 to about 0.46 in early 2024, suggesting an improvement in the company’s leverage position over time. There are minor fluctuations within this trend: the ratio dropped steadily through 2021 into 2022, reaching a low around 0.46 to 0.48. A temporary increase occurred at the end of 2022, corresponding with the rise in total debt, but the ratio returned to lower levels in 2023 and remained stable around 0.46 through early 2024. This indicates that despite some periodic debt increases, total assets growth has outpaced debt increments, resulting in lower relative leverage.

Overall Insights

The data reflects a company maintaining a relatively consistent debt load while steadily increasing its asset base, which has generally enhanced its financial leverage profile. The moderate fluctuations in debt levels suggest active management of liabilities, potentially in response to strategic investments or capital structuring decisions. The decreasing debt to assets ratio over time is a positive indicator of financial stability and reduced risk, implying improved capacity to meet financial obligations through asset holdings. The brief surge in debt observed near the end of 2022 warrants monitoring but has not altered the overall trend of improved leverage.

The analysis of the financial data over the reported quarterly periods reveals several key trends and patterns regarding the company’s debt levels, asset growth, and leverage ratios.

Total Debt (including operating lease liability):

The total debt has generally remained in a relatively stable range from March 2019 through March 2024, fluctuating between approximately $6.5 billion and $8.1 billion. Notable increases occurred around mid-2020 and late 2022, with peaks near $8.1 billion and $8.1 billion respectively. After these peaks, debt levels tend to revert to the $6.7 billion to $6.8 billion range. This indicates episodic borrowing or lease obligations adjustments rather than a steadily increasing or decreasing debt.

Total Assets:

Total assets have shown a consistent upward trend across the periods. Starting at approximately $10.9 billion in March 2019, assets nearly increased to $14.3 billion by March 2024. This growth suggests ongoing asset accumulation or appreciation, possibly from investments, acquisitions, or retained earnings, supporting the company’s expansion or enhanced operational capacity over time.

Debt to Assets Ratio (including operating lease liability):

The debt to assets ratio demonstrates a gradual but clear downward trend from about 0.60 in early 2019 to around 0.47 by early 2024. This declining ratio indicates an improvement in financial stability and reduced financial leverage. Despite some short-term increases, such as in mid-2020 and late 2022 corresponding to rises in debt levels, the general reduction suggests that asset growth outpaced increases in debt over the period examined, strengthening the balance sheet.

In summary, the company appears to manage its debt prudently, avoiding a sustained increase in liabilities while steadily growing its asset base. The decline in leverage ratio over nearly five years indicates improved financial health and potentially greater capacity to finance operations through equity or operational cash flows rather than reliance on debt. The periodic spikes in total debt may reflect strategic financing decisions, seasonal factors, or lease accounting changes, which are subsequently balanced by reductions or asset growth.

Total Assets

The total assets generally exhibit an upward trend over the observed periods, increasing from $10,883 million in March 2019 to $14,348 million in March 2024. Notable growth is observed particularly between the end of 2019 and mid-2020, rising from $11,545 million to $13,069 million. Thereafter, the total assets fluctuate moderately, maintaining a level above $13,000 million, with minor declines observed at certain intervals such as from March 2022 to September 2022 and again from March 2023 to June 2023. Overall, the asset base expanded steadily with some short-term variability.

Total Equity

Total equity demonstrates a consistent increase from $2,317 million in March 2019 to $5,058 million in March 2024. The equity showed marked growth especially between June 2019 and December 2020, rising from $2,411 million to a peak of $3,769 million, reflecting strengthening financial stability. Subsequent periods reveal continued growth, reaching nearly $5,000 million in late 2023 and early 2024. Minor decreases occur sporadically, such as in late 2021 and late 2022, but the general trajectory remains upward, indicating enhanced shareholder value and retained earnings over time.

Financial Leverage

The financial leverage ratio exhibits a declining trend from 4.7 in March 2019 to approximately 2.84 in March 2024. This decline suggests a reduction in the degree of financial leverage or the company’s reliance on debt relative to equity. The ratio decreased steadily through the mid-2021 period, reaching a low of around 2.78 in December 2023, before slightly increasing to 2.84 by March 2024. This lowering leverage ratio can be interpreted as a positive financial risk indicator, implying improved capital structure and potentially reduced creditor risk over time.

Summary Insights

Overall, the data reflects consistent asset growth accompanied by a strengthening equity base, contributing to a significant reduction in financial leverage. This signals a healthier financial position with more reliance on equity financing relative to debt. The fluctuations observed in certain quarters correlate with normal business cycles and do not detract from the underlying positive trends. The combination of rising total equity and a falling leverage ratio points to enhanced financial stability and a potentially lower risk profile for the entity over the five-year period.

The quarterly financial data reveals several notable trends in the performance and financial health over the analyzed periods.

Earnings Before Interest and Tax (EBIT)

EBIT displays a generally positive growth trajectory from March 2019 through March 2024, with fluctuations across quarters. Starting at 437 million USD in the first quarter of 2019, EBIT shows incremental increases, peaking at 930 million USD in the quarter ending June 2023. Some quarters, such as December 2020 and December 2022, show dips but are followed by recoveries. This pattern suggests cyclical variations but an overall strengthening operating profitability over time.

Interest Expense, Net of Capitalized Interest

Interest expense remains relatively stable throughout the period, fluctuating modestly between 53 million and 63 million USD. This consistency indicates steady financing costs without significant increases in debt-related expenses, despite the growth in EBIT.

Interest Coverage Ratio

The interest coverage ratio demonstrates a strong and improving capacity to service debt. Beginning near 9.08 in late 2019, the ratio increases steadily, reaching 13.76 by March 2024. This upward trend reflects the combined effects of rising EBIT and stable interest expenses, indicating enhanced financial resilience and lower risk of default on interest obligations.

Overall, the data suggest that the entity has been improving operational earnings while maintaining manageable interest expenses, leading to a solid and increasing interest coverage ratio. This pattern underscores an improving ability to meet financial obligations and potentially greater financial flexibility going forward.