Central Garden & Pet Company (CENT - Free Report) is benefiting from the buyouts of Arden Companies and Bell Nursery along with sturdy growth in the Garden segment. However, higher SG&A costs, economic challenges in the agricultural sector as well as unfavorable weather for livestock and grain protection are concerns.
Notably, this Zacks Rank #3 (Hold) company’s shares have increased 4.8% in the past six months against the industry’s decline of 5.5%.
A Brief Introspection
Central Garden & Pet is actively pursuing strategic acquisitions to gain market share. In this regard, the company recently acquired C&S Products during the third quarter of fiscal 2019, which complements its wild bird feed business. Prior to this, the company acquired the remaining 55% stake in Arden Companies in February 2019. In March 2018, the company bought Bell Nursery, a leading grower and distributor of live flowers and plants. In April 2018, it acquired General Pet Supply, a supplier of pet food and supplies. The buyouts of Arden and C&S contributed $45 million to the top line in the third quarter of fiscal 2019.
Growth in Arden Companies and Bell Nursery along with improvement in margins on a sequential basis drove the company’s third-quarter fiscal 2019 results. In the said quarter, the top and the bottom line improved year over year. Going ahead into the fourth quarter, the company expects the momentum to continue.
Further, the company witnessed solid growth in the Garden segment. Revenues in the segment rose 17.5% year over year backed by the Arden acquisition. Moreover, sturdy growth in the segment led to overall sales increase of 7% in the fiscal third quarter. Also, organic sales inched up 0.6% during the reported quarter. Moving ahead, management projects strong organic sales growth in the fiscal fourth quarter.
However, net sales in the Pet segment fell 1.3% year over year. Organic sales fell 2.3% due to softness in the animal health and pet distribution businesses. In fact, management’s trimmed forecast for fiscal 2019 earnings take into account short-term challenges in the animal health businesses. The company now envisions adjusted earnings to be $1.72 or higher compared with the previous view of $1.80 or higher.
All said, we hope that the recent buyouts and robust Garden segment will boost the company’s top line and offset the headwinds.
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