We have maintained our long-term Underperform recommendation
Central Garden & Pet Company
) with a target price of $8.00, as it continues to perform
disappointingly as evident from its sluggish quarterly
Why the Reiteration?
Lower sales along with increased promotional and innovation
costs continue to take a toll on Central Garden & Pet
Company's results. The company reported a loss of 32 cents per
share in the first quarter 2013, widening from the Zacks
Consensus Estimate of a loss of 28 cents a share. Moreover, the
reported loss increased 5 cents on a year-over-year basis.
A look at the company's earnings surprise history implies that
CentralGarden has missed the Zacks Consensus Estimate in 3 of the
trailing 4 quarters. The average surprise over the last 4
quarters remained negative at 12%.
Total sales for this Zacks Rank #4 (Sell) company decreased 3%
year over year to $292.5 million, reflecting lower sales across
the Pet and Garden segment. However, total sales came marginally
ahead of the Zacks Consensus Estimate of $292 million.
Consolidated gross profit decreased 4.7% year over year to $77
million, while gross margin decreased approximately 40 basis
points to 26.3%. CentralGardenreported an operating loss of $13.1
million that widened from an operating loss of $11.3 million in
the prior-year quarter.
Following a dismal bottom-line performance in the first
quarter, the Zacks Consensus Estimates have been showing a
downward trend. For fiscal 2013 and 2014, the Zacks Consensus
Estimate dropped by 3 cents to 76 cents and $1.00 per share,
respectively, in the last 60 days.
Going forward, we believe that the macroeconomic headwinds,
rising costs and competitive pressures will continue to deter the
results of CentralGarden.
Other Stocks to Consider
Until any further upward revision in Central Garden &
Pet's rating, other stocks in the consumer goods and pet products
universe with a favorable Zacks Rank worth considering include
Spectrum Brands Holdings, Inc
PetMed Express, Inc.
), both of which hold a Zacks Rank #1 (Strong Buy) and are
expected to continue with its upbeat performance.
Prestige Brands Holdings, Inc
) carrying a Zacks Rank #2 (Buy) is also worth considering.
CENTRAL GARDEN (CENT): Free Stock Analysis
PRESTIGE BRANDS (PBH): Free Stock Analysis
PETMED EXPRESS (PETS): Free Stock Analysis
SPECTRUM BRANDS (SPB): Free Stock Analysis
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