"Stock Market Joe"
Gerelyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In Super Bowl XLVII, Baltimore Ravens' rookie quarterback Joe Flacco led the team to victory and to recapture a title that has eluded the organization for more than a decade. One of the Super Bowl sports commentators on the CBS Network referred to the Super Bowl MVP as "stock market Joe" because as Joe -- who had highs and lows in the season -- was gearing his team up for victory, so too was the Dow Jones Industrial Average -- despite its volatility -- gaining ground. The index recently surpassed the 14,000 level, which it has not experienced since 2007.
There seems to be a celebratory tone around the stock market that hasn't been sustainable for some time. That the Dow surpassed 14,000 is an important psychological achievement for investors to experience, just as it was when the Dow first crossed 10,000 in 1999 when hats were distributed to commemorate the occasion.
Zoetis a Free Agent
It couldn't be a better time for new stocks to enter the market, which is precisely what Pfizer (NYSE: PFE) did with the spin-off of Zoetis (NYSE: ZTS), an animal health business focused on livestock and companion pets, decided to do. Actually, the decision came at the hand of Zoetis' parent company, Pfizer, which is the recipient of the $2 billion plus in proceeds earned in the Zoetis IPO. Pfizer sold 17% of Zoetis and continues to be a majority owner in the animal-health company.
For its part, Pfizer's strategy to focus on its core business of human health, which also included the recent $11.8 billion sale of Pfizer Nutrition to Nestle, is helping profits. In its 4Q quarter, which included a gain from the sale of its nutrition arm, Pfizer's profits rose to $6.3 billion, or $0.85 per share versus $1.4 billion, or $0.19 in EPS in the year ago quarter.
Shares of Zoetis climbed approximately 20 percent in the IPO and the company has the distinction of being the largest IPO since Facebook. Zoetis, with a 60-year track record, is a well-established business that has growth in its future.
Analysts project that Zoetis will continue to grow at a rate of 5.7% annual over the next three years, and much of that growth will be driven by the company's livestock business, according to a recent Bloomberg interview with Juan Ramon' Alaix, chief executive at Zoetis.
Zoetis, with $4.2 billion in revenues for the year ended December 31, 2011, is a market leader in animal health, according to the company's own S-1 filing. Indeed, its sales trump those generated by rivals, including Merck, whose animal business generated sales of $3.3 billion in 2011, and Eli Lilly, whose animal health division Elanco produced revenues of $1.7 billion the same period, according to data compiled by Bloomberg.
In addition to developed markets, Zoetis has a presence in emerging markets such as Brazil, India and China, where more than one-quarter of revenues are earned. As previously noted, the global market opportunity for animal health and livestock is huge at $22 billion.
The market, however, is getting more crowded. For instance, generic drug-maker Perrigo (NASDAQ: PRGO) recently cemented its commitment to the animal health space through its $160 million acquisition of privately-held animal health company Velcera, which makes over-the-counter animal health remedies. In 2012, Velcera -- which is also behind the PetArmor brand -- generated sales of $60 million. Perrigo entered the OTC animal health market in October 2012 with its acquisition of Sergeant's Pet Care Products.
Shares of Perrigo are up more than 6% since it announced its acquisition of Velcera. Perrigo has a market cap of approximately $10 billion and the stock has a trailing price-to-earnings ratio of approximately 22.
The Dow, of course, is a volatile index and will likely drop below and rise above 14k before it seems to get comfortable at these levels. Nonetheless, Joe Flacco is a rising star and if his career and performance Dow Jones Industrial Average continue to align in coming years, investors could be in for a wild ride.
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