It has been about a month since the last earnings report for PetMed Express, Inc. . Shares have added about 6.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is PETS due for a pullback? 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.
PetMed announced earnings per share (EPS) of 50 cents for the fourth quarter of fiscal 2018, up from the year-ago quarter’s 37 cents. Also, the bottom line surpassed the Zacks Consensus Estimate of 44 cents by 13.6%. The year-over-year rise in earnings was driven by an increase in gross profit margin. Further, lower tax rate due to the recent U.S. tax reform also provided impetus to the upside in earnings.
For the full year, EPS reached $1.82, an increase of 55.6% from the year-ago period figure of $1.17. The EPS figure also beat the Zacks Consensus Estimate of $1.77.
Net sales in the reported quarter rose 6.8% year over year to $67.3 million. However, the figure missed the Zacks Consensus Estimate of $68.1 million by 1.12%.
Per this leading pet pharmacy in Americas, the upside in sales was a result of increased reorders during the quarter.
For the full year, net sales were $273.8 million, up 9.9% from the year-ago period. Net sales, however, missed the Zacks Consensus Estimate of $274.6 million.
In the reported quarter, reorder sales increased 9.4% to $57 million on a year-over-year basis while new order sales declined 5% to $10.3 million.
Average order value was approximately $89 in the quarter compared with $86 in the year-ago quarter. We note that the variation in average order value is mainly driven by a shift of sales to higher priced items.
Per 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 113,000 new customers, up from 126,000 a year ago. Roughly, 85% of all orders was generated from its website (compared with 83% in the prior-year quarter).
Gross margin expanded 190 basis points (bps) year over year to 37% in the quarter under review. General and administrative expenses were up 8.9% year over year to $6.1 million. However, advertising expenses declined 2.3% to $4.3 million. Adjusted operating expenses, however, rose 6% (without depreciation expense), amounting to $10.4 million. Nevertheless, adjusted operating margin in the quarter expanded 210 bps to 21.5% from the year-ago quarter.
PetMed exited the fiscal year with cash and cash equivalents of $77.9 million, compared with $58.7 million at the end of the fiscal 2017. The company also declared a quarterly dividend of 25 cents per share, payable to shareholders on record as of May 25, 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, PETS has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
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.
Based on our scores, the stock is more suitable for growth and momentum investors than value investors.
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise PETS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.