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Central Garden & Pet (CENT) Tops Q4 Earnings, Lags Sales

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Central Garden & Pet Company (CENT - Free Report) continued with its positive earnings surprise streak for the ninth consecutive quarter, when it reported fourth-quarter fiscal 2016 results. Following, the results, shares increased 2.2% in after-hours trading session. In fact, in the past six months the stock has displayed a tremendous run in the index, surging 48% compared with the Zacks Categorized Consumer Discretionary industry that increased 5.4%.

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, thereby resulting in the improved performance.

 

The company posted adjusted earnings of 13 cents per share that beat the Zacks Consensus Estimate of 5 cents and also increased sharply from the year-ago figure of 1 cent. The better-than-expected results were driven by improved top-line performance and effective cost-containment efforts.

Net sales of this leading producer of branded lawn & garden and pet supplies products grew 7% year over year to $413.4 million but missed the Zacks Consensus Estimate of $417 million, after surpassing the same in the preceding five quarters.

Gross profit increased 11.3% to $120.2 million, while gross margin expanded 120 basis points (bps) to 29.1%. Central Garden & Pet reported adjusted operating income of $14.8 million, up 72.3% year-ago quarter. Operating margin expanded 140 bps to 3.6% in the reported quarter.

Segment Details    

The Pet segment’s net sales increased 14.9% year over year to $270.7 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 $214.6 million and $56 million, reflecting an increase of 18.7% and 2.3%, respectively.

The segment’s operating income rose 23.8% year over year to $22.6 million, whereas operating margin expanded 60 bps to 8.3%.

Net sales at the Garden segment decreased 5.3% to $142.8 million primarily due to a decline of $13.6 million from the holiday decor business from which the company exited earlier in the year. Sales across the segment’s branded product came in at $115.3 million, down 10.2% year over year, whereas other manufacturers’ reported revenues of $27.4 million, up 23% year over year. The segment recorded an operating income of $2.7 million, in comparison to $0.9 million recorded in the prior-year quarter.

Financial Details

Central Garden & Pet ended the quarter with cash and cash equivalents of $93 million, long-term debt of $394.8 million and shareholders’ equity of $553 million, excluding non-controlling interest of $1.6 million.

CENTRAL GARDEN Price, Consensus and EPS Surprise

 

CENTRAL GARDEN Price, Consensus and EPS Surprise | CENTRAL GARDEN Quote

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 and bottom-line growth going forward.

The company expects fiscal 2017 earnings per share of $1.34, up approximately 6% from the prior year. Capital expenditure is projected to be in the range of $40 million to $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 - Free Report) , sporting a Zacks Rank #1 (Strong Buy) while Zumiez Inc. (ZUMZ - Free Report) and Nordstrom Inc. (JWN - Free Report) , 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 32%.

Nordstrom’s long-term EPS growth rate of 9.7% and solid positive estimate revisions for the current fiscal in the past 30 days aid it to stand strong in the industry. Moreover, the company has delivered back-to-back earnings beat in the last two quarters.

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