Central Garden & Pet (CENT) Down 13.8% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Central Garden & Pet Company CENT. Shares have lost about 13.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Central Garden & Pet Tops Q2 Earnings, Raises ‘17 View
Central Garden & Pet Company continued with its positive earnings surprise streak for the eleventh consecutive quarter, when it reported second-quarter fiscal 2017 results. The company posted adjusted earnings of $0.67 per share that beat the Zacks Consensus Estimate of $0.64 and also increased 3.1% year over year.
Organic growth, value accretive acquisitions such as that of the pet bedding business and Segrest along with divestment of non-strategic assets have been aiding the company to enhance portfolio, consequently resulting in improved performance.
Net sales of this leading producer of branded lawn & garden and pet supplies products grew 5.3% year over year to $569.9 million and coming marginally ahead of the Zacks Consensus Estimate of $566 million. Revenue growth was driven by the company’s recent Segrest acquisition.
Gross profit increased 8.4% to $183.5 million, while gross margin expanded 90 bps to 32.2%. Central Garden & Pet reported operating income of $63.9 million, compared with $59.4 million in the year-ago quarter. Operating margin expanded 20 bps to 11.2% in the quarter under review.
Segment Details
The Pet segment’s net sales gained 8.4% year over year to $298.4 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 $240.5 million and $57.9 million, reflecting an increase of 10.9% and decline of 0.9%, respectively. Moreover, Pet organic sales increased 1.3%.
The segment’s operating income rose 6.9% year over year to $34.6 million, while operating margin contracted 20 bps to 11.6%.
Net sales at the Garden segment were up 2.1% to $271.5 million. The segments revenues were driven by increase in sales of other manufacturers’ products rise in control and fertilizer sales. Sales across the segment’s branded product came in at $216.7 million, up 0.4% year over year, while other manufacturers’ reported revenues of $54.8 million, up 9.4% year over year.
The segment recorded an operating income of $46 million, in comparison with $44.4 million recorded in the prior-year quarter.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $11 million, long-term debt of $495.9 million and shareholders’ equity of $593.2 million, excluding non-controlling interest of $1.3 million.
2017 Guidance
In an effort to deliver sustainable growth, the company is increasing investment. However, costs related to initiatives may hurt 2017 net income but will drive top-line growth in second-half fiscal 2017.
Central Garden has raised earnings projections. The company expects fiscal 2017 earnings per share of $1.37 or higher, up approximately 8.7% or above from the prior year. The company had earlier projected 2017 earnings per share of $1.34.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
Central Garden & Pet Company Price and Consensus
Central Garden & Pet Company Price and Consensus | Central Garden & Pet Company Quote
VGM Scores
At this time, Central Garden & Pet's stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'C'. Charting an exact same path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is suitable for momentum and value investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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