Elanco Animal Health shares rose sharply on Friday after the company reported third-quarter results ahead of expectations and raised its full-year guidance, driven by strong sales of its newer pet health products.

Revenue and profit beat forecasts

Elanco reported revenue of $1.27 billion for the quarter ended in September, up 11% on the same period last year and above the consensus estimate of about $1.21 billion. Adjusted earnings per share came in at $0.27, beating the consensus estimate of $0.20 and rising from $0.19 a year earlier. Adjusted EBITDA rose 23% to $243 million, and the company recorded net income of $18 million. Zacks said the results represented an earnings surprise of 35% and a revenue surprise of nearly 5%.

Innovation products lead the growth

Revenue from the company's innovation portfolio reached $328 million, up 40% year on year, led by its Big 6 products. US pet health revenue grew 13% in organic constant-currency terms, driven by vet clinic sales of Credelio Quattro and Zenrelia, while international pet health rose 17%. Zenrelia's US market share rose 7 percentage points year on year to a record high in September, and Credelio Quattro overtook Seresto as the largest US pet health product. Adjusted gross margin expanded by 300 basis points to 56.1%.

Guidance raised for the full year

Management raised its full-year 2026 outlook, projecting revenue of between $5.155 billion and $5.18 billion, adjusted EBITDA of $1.05 billion to $1.065 billion, and adjusted earnings per share of $1.17 to $1.20. It also raised its full-year innovation revenue target to $1.275 billion. The company said its net leverage ratio had fallen below 3.0 times ahead of schedule, and free cash flow of $362 million so far this year keeps it on track towards its target of $1 billion through 2028.