About a month has gone by since the last earnings report for Central Garden & Pet Company (CENT - Free Report) . Shares have added about 11.7% in that time frame.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Central Garden & Pet Beats on Q3 Earnings & Sales Estimate
Central Garden & Pet delivered yet another impressive performance, with both the top and bottom lines surpassing the Zacks Consensus estimate for the third time in row, when it posted third-quarter fiscal 2017 results. The company posted adjusted earnings of $0.62 per share that beat the Zacks Consensus Estimate of $0.50 and also increased 21.6% year over year. Subsequently, it raised adjusted earnings per share guidance for the fiscal year.
Organic growth, value accretive acquisitions such as that of the pet bedding business and Segrest along with divestment of non-strategic assets have been aiding the company to enhance portfolio, consequently resulting in improved performance. During the reported quarter, both the Pet and Garden segments delivered robust results.
Net sales of this leading producer of branded lawn & garden and pet supplies products grew 11.7% year over year to $574.6 million and also came ahead of the Zacks Consensus Estimate of $541 million. The increase in sales was driven by the robust organic growth in Garden segment. The company’s organic sales, after excluding the impact of Segrest and K&H businesses, increased 7.6%.
Gross profit increased 11.9% to $183.3 million, while gross margin expanded 10 basis points (bps) to 31.9%. Central Garden & Pet reported operating income of $57.9 million, compared with $48.2 million in the year-ago quarter. Operating margin expanded 70 bps to 10.1% in the quarter under review.
The Pet segment’s net sales gained 9.1% year over year to $313.4 million on the back of the Segrest and K&H acquisitions. Moreover, Pet organic sales increased 1.7% primarily owing to robust performance of the company’s consumer businesses. Sales across the segment’s branded product and other manufacturers’ products came in at $254.3 million and $59 million, reflecting an increase of 11.7% and decline of 0.8%, respectively.
The segment’s operating income declined 6.9% year over year to $36.1 million, while operating margin contracted 200 bps to 11.5%. The segment’s operating income was negatively impacted by rise in expenses, unfavorable sales mix in the animal health business and due to recent buyouts.
Net sales at the Garden segment were up 14.9% to $261.2 million. Sales improved on account of increase in market share and robust performance of all categories expect bird feed. Sales across the segment’s branded product came in at $207.7 million, up 18.1%, while other manufacturers’ reported revenues of $53.5 million, up 4% year over year. The segment recorded an operating income of $38.3 million, in comparison with $26.5 million registered in the prior-year quarter.
Central Garden & Pet ended the quarter with cash and cash equivalents of $14.5 million, long-term debt of $435.1 million and shareholders’ equity of $627.1 million, excluding non-controlling interest of $1.9 million.
Following robust quarterly numbers, Central Garden has raised earnings projections. The company expects fiscal 2017 earnings per share of $1.44 or more, up approximately 14.3% or higher from the prior year. The company had earlier projected earnings per share of $1.37.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
At this time, the stock has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.