As the pet care industry experiences rapid growth, pharmaceutical companies are increasingly focusing on developing innovative treatments for companion animals.

• ELAN is charging ahead with explosive momentum. Get the inside scoop here

KeyBanc Capital Markets initiated coverage on Elanco Animal Health Incorporated (NYSE:ELAN).

The company’s recent Innovation Products launches (Zenrelia and Credelio Quattro) are showing strong revenue growth, the analyst said in a note.

Analyst Steve Decher expects these and other Innovation Products to continue to drive revenue growth over the next few years (6-8% annual growth from 2025-2028 vs. low single digit from 2022-2024).

Also Read: Elanco Animal Health Gets Its Bite Back, Pipeline Efforts Earn Praise

The analyst also expects margin expansion from a higher Companion Animal revenue mix and from the cost savings program.

Elanco’s trailing leverage ratio is down from ~5.5x in 2023 to ~4x currently, and KeyBanc expects further leverage improvement from increased profitability/cash generation.

Analyst Forecast

KeyBanc initiated with an Overweight rating and a price forecast of $27. The analyst currently considers shares of Elanco to be undervalued.

Elanco shares are trading at a ~21x forward P/E multiple, which is a premium to its two-year average of ~15.5x.

However, KeyBanc on Thursday wrote that Elanco’s higher expected revenue growth, expanding margins, and improved balance sheet warrant a higher multiple.

Elanco reported third-quarter 2025 results on Wednesday, posting adjusted earnings per share of 19 cents, up 46% year over year.

Earnings exceeded both the company’s guidance range of 12-16 cents and the consensus estimate of 13 cents.

Revenue came in at $1.14 billion, surpassing the consensus estimate of $1.09 billion and exceeding management’s guidance of $1.08 billion to $1.11 billion.

ELAN Price Action: Elanco Animal Health shares were up 3.84% at $22.05 at the time of publication on Friday. The stock is approaching its 52-week high of $23.09, according to Benzinga Pro data.

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