Story
BofA Names Elanco Top Animal Health Pick Amid Declining Vet Visits, Competition
Summary
Bank of America reiterated its 'Buy' rating on Elanco Animal Health but maintained a cautious sector view, citing data showing persistent declines in veterinary visits and increased drug competition.
Bank of America has reiterated Elanco Animal Health (ELAN) as its top pick in the animal health sector, maintaining a cautious outlook for the industry ahead of second-quarter 2026 earnings reports. In a note to clients, the firm stated that key pressures from the first quarter, including declining veterinary visits and rising drug competition, continue to weigh on the sector.
Analyst Ratings
BofA reaffirmed its Buy rating on Elanco, citing a "clearer catalyst profile and potential for estimate increases." The bank's analysts see a more favorable path for Elanco compared to its peers.
In contrast, the firm maintained Neutral ratings for both Zoetis (ZTS) and Idexx Laboratories (IDXX). According to the report, investor sentiment toward these two companies remains negative, with Zoetis reportedly reaching "all-time valuation lows." BofA pointed to near-term headwinds and competition as potential challenges for Zoetis, while it expects Idexx's Q2 results to be in line with estimates without major surprises.
Sector Headwinds
AdThe bank's cautious stance is supported by key industry data and market dynamics. Veterinary visit data from VetSource continues to show a slowdown, a critical indicator for the sector's performance.
- Q2 2026 veterinary visits declined 1.9% year-over-year, a trend consistent with the first quarter.
- July 2026 data indicated a steeper 4% year-over-year decline, though BofA noted potential distortion from the July 4 holiday timing.
- Full-year 2026 forecast: The bank expects vet visits to decline by approximately 2% and does not anticipate a sustained near-term improvement.
Adding to the pressure, a market analysis from the CATalyst Council published during the quarter forecast that visit declines could continue past 2030. BofA also noted that while new market entrants are pricing products below established companies, its channel checks found no evidence of significant price cuts from Zoetis, which has guided for 1% to 2% price increases.
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