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Analyst Blog

On Apr 16, we upgraded consumer goods company, Central Garden & Pet Company 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. and The Home Depot, Inc. . 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. , which holds a Zacks Rank #1 (Strong Buy) and is expected to continue with its upbeat performance.

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