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Why Is Central Garden (CENT) Down 5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Central Garden (CENT - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Central Garden due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Central Garden & Pet Q1 Loss Narrower Than Expected
Central Garden & Pet Company posted a narrower-than-expected loss in the first quarter of fiscal 2023. Net sales also came ahead of the Zacks Consensus Estimate.
However, the top and bottom lines declined year over year. Nonetheless, the company’s better-than-expected performance came despite challenges related to softness in the garden segment, higher retailer inventories, sluggish foot traffic at garden retailers and higher input costs.
Central Garden & Pet Company has been taking steps to strengthen its position in the pet supplies and lawn and garden supplies space. It has been simplifying the portfolio, developing new products and advancing digital capabilities as well as automation.
For the remainder year, management foresees a normal garden season. It anticipates inventory dynamics to stabilize and expects pricing actions and cost containment efforts to largely mitigate the impact of inflation. Central Garden & Pet Company reiterated its fiscal 2023 earnings view.
Let’s Delve Deeper
Central Garden & Pet reported a quarterly loss of 16 cents a share, narrower than the Zacks Consensus Estimate of a loss of 18 cents. However, the bottom line declined sharply from earnings of 16 cents reported in the year-ago period.
The company generated net sales of $627.7 million, which beat the Zacks Consensus Estimate of $605.6 million. However, the metric declined 5% from the year-ago period.
The gross profit decreased 13.4% to $171.7 million. Also, the gross margin contracted 260 basis points to 27.4%. The decline was driven by the Garden segment, largely due to cost inflation and unfavorable overhead absorption owing to lower sales. This was partly mitigated by pricing actions.
SG&A expenses of $171.3 million declined 0.4% year over year. As a percentage of net sales, SG&A expenses increased 130 basis points to 27.3%.
The operating income totaled $0.4 million, down from the $26.2 million reported in the year-ago period. The operating margin shriveled 390 basis points to 0.1%. Adjusted EBITDA was $28.7 million compared with $51.6 million in the prior year.
Segment Details
Net sales in the Pet segment were $416 million, down 5% from the year-ago period. The metric declined due to the muted demand for durable pet products, primarily in Aquatics, and the decision to exit low-profit private-label product lines, especially in pet beds. However, the company registered a sturdy sales performance in dog and cat brands and outdoor cushions.
The segment’s operating income came in at $40 million, down from the $45 million reported in the prior-year quarter. Meanwhile, the operating margin shrunk 90 basis points to 9.5%. The decline was mainly driven by inflation and lower sales, partly offset by pricing actions.
In the Garden segment, net sales decreased 6% year over year to $212 million, driven by softness in live goods and Controls & Fertilizer, partly mitigated by strength in Wild Bird and Grass Seed. Higher inventories at retail and lower foot traffic also hurt net sales. The segment’s operating loss came in at $11 million against the operating income of $6 million reported in the year-ago period.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $87.8 million, long-term debt of $1,186.6 million and shareholders’ equity of $1,322.9 million, excluding the non-controlling interest of $0.6 million. The company repurchased about 251,000 shares worth $9 million in the quarter under review.
Management incurred capital expenditures of $18 million during the quarter under review. For fiscal 2023, Central Garden & Pet anticipates capital expenditures in the band of $70 million-$80 million.
Outlook
Central Garden & Pet maintained the fiscal 2023 earnings projection of $2.60 to $2.80 per share compared with $2.80 reported in the year-ago period. The company expects the bottom line in the first two quarters of the fiscal year to be lower than the prior year but foresees growth in the second half.
The projection indicates macroeconomic uncertainty, further cost inflation, changing customer behavior and unfavorable retailer inventory dynamics. It also suggests anticipated pricing actions and productivity initiatives to mitigate the impact of inflationary headwinds.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Central Garden has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Central Garden has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Central Garden (CENT) Down 5% Since Last Earnings Report?
It has been about a month since the last earnings report for Central Garden (CENT - Free Report) . Shares have lost about 5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Central Garden due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Central Garden & Pet Q1 Loss Narrower Than Expected
Central Garden & Pet Company posted a narrower-than-expected loss in the first quarter of fiscal 2023. Net sales also came ahead of the Zacks Consensus Estimate.
However, the top and bottom lines declined year over year. Nonetheless, the company’s better-than-expected performance came despite challenges related to softness in the garden segment, higher retailer inventories, sluggish foot traffic at garden retailers and higher input costs.
Central Garden & Pet Company has been taking steps to strengthen its position in the pet supplies and lawn and garden supplies space. It has been simplifying the portfolio, developing new products and advancing digital capabilities as well as automation.
For the remainder year, management foresees a normal garden season. It anticipates inventory dynamics to stabilize and expects pricing actions and cost containment efforts to largely mitigate the impact of inflation. Central Garden & Pet Company reiterated its fiscal 2023 earnings view.
Let’s Delve Deeper
Central Garden & Pet reported a quarterly loss of 16 cents a share, narrower than the Zacks Consensus Estimate of a loss of 18 cents. However, the bottom line declined sharply from earnings of 16 cents reported in the year-ago period.
The company generated net sales of $627.7 million, which beat the Zacks Consensus Estimate of $605.6 million. However, the metric declined 5% from the year-ago period.
The gross profit decreased 13.4% to $171.7 million. Also, the gross margin contracted 260 basis points to 27.4%. The decline was driven by the Garden segment, largely due to cost inflation and unfavorable overhead absorption owing to lower sales. This was partly mitigated by pricing actions.
SG&A expenses of $171.3 million declined 0.4% year over year. As a percentage of net sales, SG&A expenses increased 130 basis points to 27.3%.
The operating income totaled $0.4 million, down from the $26.2 million reported in the year-ago period. The operating margin shriveled 390 basis points to 0.1%. Adjusted EBITDA was $28.7 million compared with $51.6 million in the prior year.
Segment Details
Net sales in the Pet segment were $416 million, down 5% from the year-ago period. The metric declined due to the muted demand for durable pet products, primarily in Aquatics, and the decision to exit low-profit private-label product lines, especially in pet beds. However, the company registered a sturdy sales performance in dog and cat brands and outdoor cushions.
The segment’s operating income came in at $40 million, down from the $45 million reported in the prior-year quarter. Meanwhile, the operating margin shrunk 90 basis points to 9.5%. The decline was mainly driven by inflation and lower sales, partly offset by pricing actions.
In the Garden segment, net sales decreased 6% year over year to $212 million, driven by softness in live goods and Controls & Fertilizer, partly mitigated by strength in Wild Bird and Grass Seed. Higher inventories at retail and lower foot traffic also hurt net sales. The segment’s operating loss came in at $11 million against the operating income of $6 million reported in the year-ago period.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $87.8 million, long-term debt of $1,186.6 million and shareholders’ equity of $1,322.9 million, excluding the non-controlling interest of $0.6 million. The company repurchased about 251,000 shares worth $9 million in the quarter under review.
Management incurred capital expenditures of $18 million during the quarter under review. For fiscal 2023, Central Garden & Pet anticipates capital expenditures in the band of $70 million-$80 million.
Outlook
Central Garden & Pet maintained the fiscal 2023 earnings projection of $2.60 to $2.80 per share compared with $2.80 reported in the year-ago period. The company expects the bottom line in the first two quarters of the fiscal year to be lower than the prior year but foresees growth in the second half.
The projection indicates macroeconomic uncertainty, further cost inflation, changing customer behavior and unfavorable retailer inventory dynamics. It also suggests anticipated pricing actions and productivity initiatives to mitigate the impact of inflationary headwinds.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Central Garden has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Central Garden has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.