On Feb 19, 2014, we issued an updated research report on
). The company reported an unimpressive third-quarter fiscal 2014
with in-line earnings per share (EPS) and revenue miss. This
nationwide pet pharmacy presently carries a Zacks Rank #3
PetMed's EPS of $0.23 during the third quarter of fiscal 2014
were in line with the year-ago figure as well as the Zacks
Consensus Estimate. Revenues were up 1% year over year to $50.1
million, but missed the estimate by 4%.
Although we are encouraged by the company's efforts to revive
the topline, lower new order sales were a drag. Moreover,
increasingproduct costs and discounts laid huge pressure on the
margin. During the reported quarter, gross margin
contracted 98 basis points (bps) year over year to 33.7%.
Adjusted operating margin also contracted 54 bps to 14.5%.
Meanwhile, the company continues to face competitive pressure in
the hugely fragmented pet medications market.
We note that, throughout the last fiscal, the sales of PetMed
had been adversely affected by the unavailability of branded
products from Novartis due to the suspension of its production.
However, we are impressed with the fact that PetMed is striving
to expand its portfolio in order to drive the top line and is
targeting every possible means to shift customers from the
Novartis brand. Such strategies include focus on advertising
efficiency to improve new order sales along with shifting sales
to high-margin items.
Key Picks from the Sector
Nonetheless, medical stocks such as
Natus Medical Inc.
) are expected to do well. While BABY carries a Zacks Rank #1
(Strong Buy), ANGO and ABMD hold a Zacks Rank #2 (Buy).
ABIOMED INC (ABMD): Free Stock Analysis
ANGIODYNAMICS (ANGO): Free Stock Analysis
NATUS MEDICAL (BABY): Free Stock Analysis
PETMED EXPRESS (PETS): Free Stock Analysis
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