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PetMed Raised to Buy on Solid Growth Strategies

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On Jul 1, 2014, Zacks Investment Research upgraded PetMed Express, Inc. to a Zacks Rank #2 (Buy).

Why the Upgrade?

PetMed posted a mixed fourth-quarter fiscal 2014 with earnings beating and revenues missing the respective Zacks Consensus Estimate. Nonetheless, we are upbeat about the fact that PetMed is striving to expand its portfolio in a bid to drive its top line.

Although fourth-quarter EPS of 23 cents was in line with the year-ago figure, it exceeded the Zacks Consensus Estimate by a couple of cents. However, an extreme winter coupled with lower new order and reorder sales caused net sales to drop 4.9% year over year to $48.6 million. The top line also missed the Zacks Consensus Estimate by 6.5%.

Strategies to drive growth amid a challeging economic scenario include focus on advertising efficiency to improve new order sales and shift sales to higher margin items.

We note that, in the last reported quarter, as a favorable reaction to promotions, average order size increased to $77 in the quarter from $75 in the year-ago period. We are also encouraged to note that the company is working on issues like limited consumer spending and a change in product mix to lower-priced items, mainly generics. Alongside, PetMed is asking veterinarians to prescribe additional brands.

The company is also working on improving the effectiveness of its campaigns. It has been quite successful in pushing its sales via the Internet. Approximately 80% of PetMed’s orders were generated on the website compared with 79% in the corresponding year-ago quarter.

Notably, the Zacks Consensus Estimate for the first quarter of 2014 has moved up 4.3% to 24 cents per share over the last 60 days.

Other Stocks to Consider

Some other well-ranked stocks in the broader medical sector include Masimo Corp. (MASI - Free Report) , ICU Medical, Inc. (ICUI - Free Report) and Hologic Inc. (HOLX - Free Report) . All the three stocks sport the same Zacks Rank as PetMed.

In-Depth Zacks Research for the Tickers Above

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Hologic, Inc. (HOLX) - free report >>

Masimo Corporation (MASI) - free report >>

ICU Medical, Inc. (ICUI) - free report >>