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PetMed (PETS) Q2 Earnings Grow Y/Y, Reorder Sales Solid

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PetMed (PETS) Q2 Earnings Grow Y/Y, Reorder Sales Solid

PetMed's (PETS) reorder sales growth solid in Q2. Increased online sales buoy optimism.

PetMed Express, Inc. PETS announced earnings per share (EPS) of 52 cents in the second quarter of fiscal 2019, up from the year-ago quarter’s 43 cents. The year-over-year upside was driven by higher gross profit margin. Further, a tax cut owing to the recent U.S. tax reform provided an impetus.

Net sales in the reported quarter rose 7% year over year to $71.4 million.

According to this leading pet pharmacy in the Americas, the sales upside was a result of increased reorders.

In the reported quarter, reorder sales increased 10.7% to $61 million on a year-over-year basis, while new order sales declined 10.3% to $10.4 million.

Average order value was approximately $87 in the quarter compared with $85 a year ago. Per the company, the seasonality in its business is mainly because of the proportion of flea, tick and heartworm medications in the product mix. Spring and summer are considered peak seasons, while fall and winter represent off-seasons.

PetMed Express, Inc. Price, Consensus and EPS Surprise

 

PetMed Express, Inc. Price, Consensus and EPS Surprise | PetMed Express, Inc. Quote

During the quarter under review, PetMed acquired 117,000 new customers compared with 134,000 in the year-ago period. Roughly 85% of all orders was generated from its website (compared with 84% a year ago).

Gross margin expanded a marginal 20 basis points (bps) year over year to 35.4% in the quarter under review. The rise was due to increase in sales of higher margin products.

General and administrative expenses rose .3% year over year to $6.2 million. Further, advertising expenses increased 17.1% to $5.3 million. Adjusted operating margin (without including depreciation expenses) rose 20 bps to 19.3% in comparison with the year-ago quarter level.

PetMed exited the fiscal second quarter with cash and cash equivalents of $87.1 million, compared with $94.6 million at the end of the first quarter of fiscal 2018. The company also declared a quarterly dividend of 27 cents per share, payable to shareholders on record as of Nov 5, 2018.

Our Take

We are encouraged by the year-over-year rise in PetMed’s earnings and sales. Growth in reorder sales is another positive. Further, increase in online sales buoys optimism.

The company is also looking to implement strategies to revitalize its top line. These include increased focus on advertising efficiency to boost new order sales as well as shifting sales to higher margin items while also expanding its product line.

Key Picks

A few top-ranked stocks in the broader medical space are Amedisys, Inc. AMED, Baxter International Inc BAX and Masimo Corporation MASI.

Amedisys is expected to release third-quarter 2018 results on Oct 29. The Zacks Consensus Estimate for adjusted EPS is 79 cents and for revenues is $410.2 million. The stock carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Baxter is expected to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for EPS is pegged at 74 cents and for revenues at $2.79 billion. The stock has a Zacks Rank #2 (Buy).

Masimo Corporation is slated to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for EPS is pinned at 68 cents and for revenues at $206.3 million. The company is a Zacks #2 Ranked player.

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