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Why Is PetMed (PETS) Up 7.7% Since the Last Earnings Report?

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It has been about a month since the last earnings report for PetMed Express, Inc. (PETS - Free Report) . Shares have added about 7.7% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

PetMed Beats Earnings, Revenue Estimates in Q4

PetMed announced earnings per share (EPS) of $0.37 for the fourth quarter of fiscal 2017, up 37% from the year-ago quarter’s $0.27. Also, earnings surpassed the Zacks Consensus Estimate by 42.3%.

The year-over-year surge in earnings was driven by increase in gross margin as a result of shift in sales mix to higher-margin items.

For the full year, EPS was $1.17, up 14.7% from the year-ago period. It has also surpassed the Zacks Consensus Estimate by 9.3%.

Net sales in the reported quarter improved 13.8% year over year to $63.0 million, beating the Zacks Consensus Estimate by 12.5%. According to the company, the upside in sales was a result of increased new orders and reorders during the quarter.

For the full year, net sales was $249.2 million and improved 6.18% from the year ago period. It has also outpaced the Zacks Consensus Estimate by 2.8%.

In the reported quarter, reorder sales increased 13.2 % to $52.1 million year over year, while new order sales rose 17% to $10.9 million.

Average order was approximately $86 for the quarter, compared with $83 in the year-ago quarter. We note that the variation in average order value is mainly driven by shift of sales to higher priced items.

According to 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.

During the quarter under review, PetMed acquired 126,000 new customers, up from 116,000 a year ago. Roughly 83% of all orders were generated from its website (versus 82% in the prior-year quarter).

Gross margin expanded 326 basis points (bps) year over year to 35.1% in the reported quarter. General and administrative expenses were up 8.9% year over year to $5.6 million, also there was a 17.1% increase in advertising expenses to $4.6 million. This led to a 12.3% increase in adjusted operating expenses (without depreciation expense), which amounted to $9.9 million. Adjusted operating margin in the quarter rose 347 bps to 19.4% than the year ago quarter.

PetMed exited the fiscal with cash and cash equivalents of $58.7 million compared with $47.9 million at the end of the third quarter. The company also declared a quarterly dividend of 20 cents per share.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter. In the past month, the consensus estimate has shifted by 21.2% due to these changes.

PetMed Express, Inc. Price and Consensus

 

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

VGM Scores

At this time, PetMed's stock has a nice Growth Score of 'B'. However, its Momentum is doing a bit better with an 'A'. The stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy).


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