UPDATE: William Blair & Company Initiates Coverage on Zoetis on Good Earnings Growth Potential

In a report published Monday, William Blair & Company analyst Margaret Kaczor initiated coverage on Zoetis (NYSE: ZTS) with a Market Perform rating.

In the report, William Blair & Company noted, “We are initiating coverage of ZTS with a Market Perform rating and Established Growth company profile after the company's spin-off from Pfizer in Feb. Combined with potential for margin leverage and cash redeployment, we believe that ZTS could generate ~10% earnings growth with little volatility and no exposure to reimbursement risk. Despite this backdrop, we are cautious on the stock's ability to outperform in the coming year considering its premium valuation and lack of visibility into the R&D pipeline. We believe new product flow will be the key to ZTS's ability to outpace the industry and sustain attractive returns. We are establishing EPS estimates for ZTS of $1.40 in ‘13, $1.55 in ‘14, and $1.70 in ‘15. These targets are based on 5%-6% organic revs growth over the LT.”

Zoetis closed on Friday at $31.20.