Bank of America reiterated a selective view of the animal health industry as companies prepare to report second-quarter 2026 results, keeping Elanco Animal Health (ELAN) as its top pick while assigning neutral ratings to Zoetis (ZTS) and Idexx Laboratories (IDXX).
The bank said the same set of pressures that affected the group in the first quarter are expected to persist into the second quarter. Key negatives include easing foot traffic to veterinary clinics and intensifying competition in drug pricing, both of which the firm said have weighed on near-term performance and investor sentiment across the sector.
Bank of America noted that investor sentiment is particularly weak for Zoetis and Idexx. The report highlighted that Zoetis has fallen to all-time valuation lows, and the firm kept its neutral stance on the stock, pointing to risks from the near-term headwinds it expects to continue affecting results.
By contrast, Elanco retained a buy rating. The bank said Elanco exhibits a clearer catalyst profile relative to peers and presents potential upside for consensus estimate revisions, which supports the more positive view.
Idexx was left on neutral as well, with Bank of America expecting its second-quarter results to come in roughly in line with estimates and not to present major surprises. That positioning reflects an outlook for steadier short-term performance but not enough near-term upside to warrant a more bullish rating.
On underlying demand, Bank of America referenced veterinary visit tracking from VetSource, which showed a 1.9% year-over-year decline in visits in the second quarter, mirroring the trend seen in the first quarter. Data for July indicated a larger year-over-year decline of 4%, though the bank cautioned that the timing of the July 4 holiday may have distorted those figures.
Overall, the bank expects veterinary visits to decline by roughly 2% for fiscal year 2026 and does not foresee a sustained improvement in the near term. The report also cited analysis from CATalyst Council - a third-party market research firm whose board includes former Idexx CEO Jon Ayers - which projects continued declines in visits beyond 2030 and forecasts a fiscal year 2027 trough of minus 2.2%.
On pricing dynamics, Bank of America said Elanco has continued to implement price increases while remaining priced below Zoetis. The bank observed that newer market entrants are setting prices below those of established players. Channel checks reported by the firm did not find evidence of meaningful price reductions from Zoetis; management there has guided to modest price increases in the range of 1% to 2%.
Taken together, Bank of America’s positioning reflects cautious optimism for Elanco based on its catalyst visibility and potential for estimate upgrades, while signaling limited near-term upside for Zoetis and Idexx as the sector navigates lower clinic visits and tougher competitive dynamics.