Pet adoption surge offers another boon for US animal health stocks

[NEW YORK] Strong pet adoption trends and increasing costs for canine care should provide another boon for high-flying animal health companies, according to Credit Suisse.

The trends indicate overall pet demand and give investors a "barometer of performance" for animal health firms within Credit Suisse analyst Erin Wright's coverage area. Industry leaders Zoetis Inc and Idexx Laboratories Inc are among the companies that may see the strongest benefit as sales of pet products pace higher, she wrote.

Pet adoptions rose 5.2 per cent in August, up from a 3.2 per cent rise in July, as both dog and cat rescues increased, according to Pethealth Inc., a provider of software for animal shelters in North America. The boost came in-line with increased numbers of drug prescriptions for animals with veterinary utilisation climbing 6.7 per cent in the month, metrics tracked by Iqvia Holdings Inc show.

Amid choppy trading for health stocks, the animal space represents an attractive alternative investment for money managers, Credit Suisse said. Idexx and Zoetis are among the year's best performing stocks in the S&P 500 Health Care Index, trailing only Celgene Corp, which agreed to be bought by Bristol-Myers Squibb Co in January.

Credit Suisse sees retail sales increasingly shifting towards online platforms like Chewy Inc. Expectations for Chewy keep going higher with the stock up almost 30 per cent from its public offering in June. The shares slumped earlier this week after the company's sales beat and forecast boost weren't as big as some investors had hoped.

BLOOMBERG