On Jun 20, 2014, we issued an updated research report on
Central Garden & Pet Company
) following the company's second quarter fiscal 2014 results.
Central Garden & Pet's quarterly earnings of 43 cents per share
missed the Zacks Consensus Estimate of 47 cents and fell 6.5% year
over year. However, the company's top line inched up 1% year
over year to $501.6 million and surpassed the Zacks Consensus
Estimate of $499 million. The rise in sales was facilitated by
favorable performance at the company's Garden segment, partly
offset by weakness at the Pet segment.
Lower-than-expected earnings and constant lower revenues from the
Pet segment made analysts less constructive on the stock's future
performance, triggering a downward revision in the estimates over
the last 60 days. Estimates for fiscal 2014 and 2015 fell 33.3% and
20.6%, to 28 cents and 50 cents, respectively. Seasonality of the
Garden segment and stiff competition remain added concerns.
To mitigate its troubles, Central Garden & Pet is on an
overhauling drive. The company intends to evolve into an
integrated, multi-brand company from a portfolio of stand-alone
businesses, by restructuring and reorganizing operating units and
Central Garden & Pet is revamping its Pet and Garden segments
to drive profitability. The company aims for a balanced approach to
encompass revenue growth as well as cost reduction. It also intends
to launch several products that appeal to customers, and upgrade
its customer service at the same time. Management expects its
ongoing transformation efforts to yield results, though not linear,
and hopes for the one-year window to gain maximum momentum.
Moreover, the company is counting on its healthy commercial
relationships with mega retailers such as
Wal-Mart Stores Inc.
) to drive profitability.
Central Garden & Pet currently carries a Zacks Rank #4 (Sell).
Key Picks from the Sector
Other better-ranked retail stocks worth investing include
Prestige Brands Holdings, Inc.
Summer Infant, Inc.
), both of which sport a Zacks Rank #1 (Strong Buy).
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