On Apr 16, we upgraded consumer goods company, Central Garden & Pet Company (CENT - Analyst Report) to Neutral based on improved prospects owing to its strategic initiatives. Central Garden, which focuses on lawn & garden and pet products, carries a Zacks Rank #3 (Hold).
Why the Upgrade?
Central Garden & Pet’s primary focus is on streamlining its cost structure, increasing operating efficiencies in order to improve its margins and concentrating on revenue growth through marketing and brand-building initiatives. The company’s long-term target is to attain growth of at least 10% in the top line, and achieve operating margins in the range of 10% – 15%. The company also targets $40 million in cumulative cost savings as it exits fiscal 2013.
Alongside, being the leading producer of garden and pet supplies products in the U.S. and with a diversified portfolio of brands, Central Garden & Pet developed a healthy commercial relationship with giant retailers, such as Wal-Mart Stores Inc. (WMT - Analyst Report) and The Home Depot, Inc. (HD - Analyst Report). This provides a significant upside potential for the company.
However, the discretionary spending environment continues to remain sluggish amid high unemployment levels and tight credit markets. This is a looming concern for the company as a significant portion of its product portfolio consists of premium offerings.
Other Stock to Consider
Besides Central Garden, the other stock in the consumer goods sector worth considering includes Jarden Corp. (JAH - Snapshot Report), which holds a Zacks Rank #1 (Strong Buy) and is expected to continue with its upbeat performance.