Central Garden & Pet (CENT) Up on Q1 Earnings & Sales Beat
Central Garden & Pet Company CENT continued with its positive earnings surprise streak for the tenth consecutive quarter, when it reported first-quarter fiscal 2017 results. Following the results, shares increased 2.7% in after-hours trading session. In fact, in the past one year, the stock has displayed a tremendous run in the index, soaring over 100% compared with the Zacks categorized Consumer Discretionary industry that increased 17.1%.
Organic growth, value accretive acquisitions such as that of the pet bedding business and divestment of non-strategic assets have been helping the company to enhance its portfolio, consequently resulting in the improved performance.
The company posted adjusted earnings of 12 cents per share that beat the Zacks Consensus Estimate of 3 cents and increased sharply from the year-ago figure of 1 cent. More than half of the company’s earnings growth was driven by acquisitions, favorable timing of revenues and effective cost-containment efforts. Moreover, the company’s continues to deliver robust organic sales growth and gain in market share.
Net sales of this leading producer of branded lawn & garden and pet supplies products grew 16.6% year over year to $419.5 million and outdid the Zacks Consensus Estimate of $376 million, after missing the same in the preceding quarter. Revenue growth was driven by fresh two acquisitions, increase in market share of Pet segment and also due to promising end to the Fall garden season.
Gross profit increased 20.9% to $120.7 million, while gross margin expanded 110 basis points (bps) to 28.8%. Central Garden & Pet reported adjusted operating income of $17.9 million that doubled from the year-ago quarter. Operating margin expanded 190 bps to 4.3% in the reported quarter.
Central Garden & Pet Company Price, Consensus and EPS Surprise
Central Garden & Pet Company Price, Consensus and EPS Surprise | Central Garden & Pet Company Quote
Segment Details
The Pet segment’s net sales surged 22.2% year over year to $304 million on the back of acquisitions as well as organic growth. Sales across the segment’s branded product and other manufacturers’ products came in at $246.4 million and $57.7 million, reflecting an increase of 30.6% and decline of 4%, respectively. Moreover, Pet organic sales increased 6.1%.
The segment’s operating income rose 27.5% year over year to $33.4 million, while operating margin expanded 50 bps to 11%.
Net sales at the Garden segment were up 5.3% to $115.5 million, in spite of a decline of $5.2 million from the holiday decor business from which the company exited in early Jan 2016. The segments revenues were driven by increase in sales of other manufacturers’ products rise in sales of grass seed and wild bird feed. Sales across the segment’s branded product came in at $86.5 million, down 1.7% year over year, while other manufacturers’ reported revenues of $29 million, up 25% year over year.
The segment recorded an operating income of $2.7 million, in comparison with an operating loss of $3.3 million recorded in the prior-year quarter.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $6.6 million, long-term debt of $395 million and shareholders’ equity of $560 million, excluding non-controlling interest of $0.7 million.
2017 Guidance
In an effort to deliver sustainable growth the company is increasing its investment. However, costs related to initiatives may hurt the company’s 2017 earnings growth rate but will drive the top-line growth going forward.
The company continues to expect fiscal 2017 earnings per share of $1.34 or higher, up approximately 6% from the prior year. Capital expenditure is projected to be in the range of $40–$45 million.
Other Stocks to Consider
Central Garden currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering include The Children's Place, Inc. PLCE, sporting a Zacks Rank #1 (Strong Buy) while Zumiez Inc. ZUMZ and Foot Locker, Inc. FL , both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children's Place has an average positive earnings surprise of 36.3% in the trailing four quarters. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 30 days.
Zumiez has a long-term earnings growth rate of 15% and the company’s earnings have surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 30.9%.
Foot Locker’s has an impressive long-term earnings growth rate of 9.7% and also the company has reported positive earnings surprise in the trailing two quarters.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Central Garden & Pet Company (CENT): Free Stock Analysis Report
Zumiez Inc. (ZUMZ): Free Stock Analysis Report
Foot Locker, Inc. (FL): Free Stock Analysis Report
Children's Place, Inc. (The) (PLCE): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
