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PetMed Express (PETS) Tops Earnings, Revenue Estimates in Q1

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PetMed Express, Inc. (PETS - Free Report) , a leading pet pharmacy in the Americas, announced earnings per share (EPS) of 45 cents for the first quarter of fiscal 2018, up 40.6% from the year-ago quarter’s 32 cents. Also, earnings surpassed the Zacks Consensus Estimate by 12.5%.

The year-over-year rise in earnings was driven by an increase in sales and improved margins.

Net sales in the reported quarter rose 9.9% year over year to $79.7 million, outpacing the Zacks Consensus Estimate by 0.9%.

According to the company, the upside in sales was a result of increased new orders and reorders during the quarter.

PetMed Express, Inc. Price, Consensus and EPS Surprise


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

In the reported quarter, reorder sales increased 9% to $64.5 million on a year-over-year basis, while new order sales rose 14% to $15.2 million.

Average order value was approximately $87 in the quarter, compared with $82 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 169,000 new customers, up from 169,000 a year ago. Roughly 84% of all orders was generated from its website (versus 82% in the prior-year quarter).

Gross margin expanded 351 basis points (bps) year over year to 34.5% in the reported quarter. General and administrative expenses were up 2.1% year over year to $6.2 million. Also, advertising expenses rose 9.2% to $6.3 million. This led to a 5.6% increase in adjusted operating expenses (without depreciation expense), which amounted to $12.5 million. Adjusted operating margin in the quarter rose 415 bps to 18.8% from the year-ago quarter.

PetMed exited the fiscal first quarter with cash and cash equivalents of $68.5 million, compared with $58.7 million at the end of fiscal 2017. The company also declared a quarterly dividend of 20 cents per share, payable to shareholders on record as of Aug 7, 2017.

Our Take

PetMed kicked off fiscal 2018 with impressive fiscal first-quarter results, beating both revenues and earnings. We are encouraged to note the stellar increase in reorder and new order sales in the quarter.

Meanwhile, the company is striving to implement several strategies to revitalize its top line. These include increased focus on advertising efficiency to boost new order sales and shifting sales to higher margin items, while also expanding product offerings.

PetMed currently offers a wide range of products catering to dogs, cats and horses, and is also working on upgrading its existing portfolio.

Zacks Rank & Other Key Picks

PetMed currently has a Zacks Rank #1 (Strong Buy). Other top-ranked medical stocks are Mesa Laboratories, Inc. (MLAB - Free Report) , INSYS Therapeutics, Inc. (INSY - Free Report) and Align Technology, Inc. (ALGN - Free Report) . Notably, INSYS Therapeutics sports a Zacks Rank #1, while Mesa Laboratories and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

INSYS Therapeutics has a long-term expected earnings growth rate of 20%. The stock has gained around 15.9% over the last three months.

Mesa Laboratories delivered a positive earnings surprise of 2.84% for the last four quarters. The stock has added roughly 5.1% over the last three months.

Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock has added roughly 35.7% over the last three months.

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