A month has gone by since the last earnings report for Central Garden (CENT Quick QuoteCENT - Free Report) . Shares have lost about 10.4% in that time frame, underperforming the S&P 500.

But investors have to be wondering, 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 its most recent earnings report in order to get a better handle on the important catalysts.

Central Garden & Pet Beats on Q3 Earnings, Raises FY26 EPS Outlook

Central Garden & Pet reported third-quarter fiscal 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Earnings declined year over year, while sales decreased due to the exit of the lower-margin pet distribution business. However, organic sales increased, reflecting growth across both the Pet and Garden segments.

The company reported adjusted earnings of $1.54 per share, which surpassed the Zacks Consensus Estimate of $1.51 but fell from $1.56 reported in the year-ago quarter.

Net sales of $882.4 million beat the Zacks Consensus Estimate of $877 million. Reported sales declined 8.2% year over year, primarily reflecting the exit of the pet distribution business. Organic net sales, excluding the impact of acquisitions and divestitures, increased 2% from the prior-year quarter to $862 million, supported by growth in both operating segments.

CENT’s Margins Expand Despite Lower Sales

Gross profit decreased 4.5% year over year to $316.9 million. However, the gross margin expanded 130 basis points (bps) to 35.9% from 34.6%, benefiting from a favorable business mix, primarily due to the exit of the lower-margin pet distribution business.

On an adjusted basis, gross profit was $318.1 million compared with $332.3 million a year ago. Adjusted gross margin expanded 140 bps to 36% from 34.6%.

SG&A expenses declined 3% to $191.1 million from $196.9 million in the prior-year quarter. Adjusted SG&A expenses fell 5.7% year over year to $182.1 million. However, adjusted SG&A as a percentage of sales increased to 20.6% from 20.1%, primarily because the exited pet distribution business had a lower SG&A rate than the remaining portfolio.

Operating income dropped 6.9% year over year to $125.8 million. The operating margin improved 20 bps to 14.3%.

Adjusted operating income declined 2.2% to $136 million from $139 million in the year-ago quarter. Nevertheless, the adjusted operating margin expanded 90 bps to 15.4%, reflecting continued productivity improvements and favorable business mix, partially offset by higher corporate spending related to the TRIXIE acquisition and investments in data capabilities.

Adjusted EBITDA totaled $161.9 million compared with $166.6 million in the prior-year quarter. The adjusted EBITDA margin improved 100 bps to 18.3%.

CENT’s Segmental Performance

Net sales in the Pet segment declined 18.7% year over year to $400.5 million, reflecting the exit of the pet distribution business. Organic Pet sales increased 1.7% to $380.3 million, driven by broad-based gains across most categories, partly offset by lower dog and cat sales due to promotional timing. Online sales rose 10%, aided by a record Prime Day, while the Professional business delivered another record quarter. The company continued to hold overall market share in Pet, with share gains across several categories, including Professional, Dog Treats, Rawhide and Flea & Tick.

Pet segment operating income plunged to $66.8 million from $76.2 million in the prior-year quarter. The operating margin expanded to 16.7% from 15.5%.

On an adjusted basis, Pet operating income totaled $76.2 million versus $77.9 million a year ago. The adjusted operating margin rose to 19% from 15.8%, benefiting from improved product mix and productivity initiatives despite higher freight and material costs. Adjusted EBITDA was $85.6 million compared with $88.3 million in the prior-year period.

The Garden segment generated net sales of $481.9 million, up 3% year over year, driven by strength in Wild Bird, Fertilizer, Controls and Grass Seed categories. The segment also maintained strong e-commerce momentum, with third-quarter online sales increasing more than 40% year over year, reflecting robust growth across both pure-play and omnichannel retail partners. 

Garden operating income increased 8.5% to $90.1 million from $83 million a year ago, while the operating margin expanded 100 bps to 18.7%.

Adjusted Garden operating income jumped to $90.8 million from $85.2 million in the year-ago quarter. The adjusted operating margin improved to 18.9% from 18.2%, supported by favorable product mix and productivity gains that more than offset higher freight and digital marketing costs. Adjusted EBITDA rose to $100.8 million from $95.6 million.

CENT Strengthens Balance Sheet

Central Garden & Pet ended the quarter with cash and cash equivalents of $996.7 million compared with $713 million in the year-ago period. Total debt remained stable at approximately $1.2 billion.

Cash provided by operating activities increased to $327 million from $265 million in the prior-year quarter, reflecting favorable seasonal working-capital movements. Capital expenditures totaled $13 million during the quarter.

Gross leverage improved to 2.8X from 2.9X a year ago, while net leverage was 0.5X. The company repurchased about 26,000 shares during the quarter and had $128 million remaining under its current share repurchase authorization.

CENT Raises FY2026 Outlook

Reflecting strong year-to-date execution and improved visibility into the remainder of the fiscal year, Central Garden & Pet raised its fiscal 2026 adjusted earnings guidance to $2.85 per share or better from the prior expectation of $2.70 per share or better. The improved outlook is driven by sustained margin discipline, continued investment in growth endeavors and ongoing portfolio optimization.

The outlook continues to assume a competitive promotional environment, value-conscious consumer spending, existing tariffs and inflation in select commodities. Capital expenditures are still expected to be approximately $50 million, focused on maintenance, productivity initiatives and targeted growth investments.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -35% due to these changes.

VGM Scores

At this time, Central Garden has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock has a score of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of A. 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. Interestingly, Central Garden has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.