Bearish View on Central Garden - Analyst Blog

By Zacks Equity Research,

Shutterstock photo

On Sep 3, we downgraded our long-term recommendation on Central Garden & Pet Company ( CENT ) to Underperform based on the company's dismal third-quarter 2013 performance. The stock currently carries a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Estimates for Central Garden & Pet have shown a downtrend since the company reported disappointing third-quarter results on Aug 7, 2013.

The company's dismal performance continued even in the third quarter. The quarterly earnings of 28 cents a share missed the Zacks Consensus Estimate of 42 cents by miles and plunged 40.4% year over year. Top line also decreased 7% year over year to $494.1 million and fell short of the Zacks Consensus Estimate of $525 million. Decline in both Pet and Garden segments and tough year-over-year comparisons were to blame. Lower sales led to a fall in consolidated gross profit.

We observe that the Central Garden & Pet's transformation activities are failing to show the desired results and therefore we remain skeptical about the future prospects of the company as the lack of improvement is dashing all hopes of recovery, at least in the near term. The company's poor performance is evident from its earnings surprise history.

The company has missed the Zacks Consensus Estimate in the trailing 4 quarters by an average of 16.5%, which is a matter of concern. The lower-than-expected results triggered a downtrend in the Zacks Consensus Estimate, as analysts become less constructive on the stock's future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that dipped 35.9% to 25 cents for 2013 and 8.1% to 57 cents a share for 2014 in the past 60 days.

Other Stocks that Warrant a Look

Not all retail stocks are performing as disappointingly as Central Garden & Pet. Other stocks worth considering include Citi Trends, Inc. ( CTRN ), Fortune Brands Home & Security, Inc. ( FBHS ) and Lumber Liquidators Holdings, Inc. ( LL ), all sporting a Zacks Rank #1 (Strong Buy).

CENTRAL GARDEN (CENT): Free Stock Analysis Report

CITI TRENDS INC (CTRN): Free Stock Analysis Report

FORTUNE BRD H&S (FBHS): Free Stock Analysis Report

LUMBER LIQUIDAT (LL): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CENT , CTRN , FBHS , LL

More from


Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by