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Central Garden & Pet Beats on Q1 Earnings, Sales; Stock Up

Central Garden & Pet CompanyCENT continued with its positive earnings surprise streak for the sixth consecutive quarter, as it reported first-quarter fiscal 2016 results, prompting management to raise its earnings outlook for the fiscal. This provided much impetus to the stock that gained 6.8% in the after-market trading hours yesterday. Management stated that organic growth, accretive acquisitions such as that of the pet bedding business and divestment of non-strategic assets helped the company to enhance its portfolio, leading to an improved performance.

This Zacks Rank #1 (Strong Buy) company posted adjusted earnings of 1 cent a share. In the prior-year quarter, the company had incurred a loss of 12 cents a share. The Zacks Consensus Estimate for the reported quarter was also pegged at a loss of 12 cents. The better-than-expected results were driven by improved top-line performance and effective cost-containment efforts.

Central Garden & Pet Company (CENT) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Management now envisions fiscal 2016 adjusted earnings to increase at least 35% to $1.00 per share or higher. Earlier, the company had projected adjusted earnings per share of at least 95 cents or an increase of 28%.

Net sales of this leading producer of branded lawn & garden and pet supplies products advanced 17% year over year to $359.8 million and surpassed the Zacks Consensus Estimate of $318 million, thus marking the third successive quarter of revenue beat.

Gross profit increased 13% to $99.8 million, while gross margin contracted 90 basis points (bps) to 27.7%. Central Garden & Pet reported operating income of $8.8 million, up from $1.1 million reported in the year-ago quarter, whereas operating margin expanded 200 bps to 2.4% in the reported quarter.

Segment Details

The Pet segment 's net sales surged 25% year over year to $248.7 million, backed by acquisitions as well as organic growth. Higher sales across the dog & cat and aquatics categories and increased sales of other manufacturers' products resulted in higher organic sales. Sales across the segment's branded product and other manufacturers' products came in at $188.6 million and $60.1 million, respectively.

The segment's operating income soared 27% year over year to $26.2 million, whereas operating margin increased 20 bps, gaining from positive sales mix, with higher percentage of dog & cat revenues, and a fall in the percentage of sales of other manufacturers' products.

Net sales at the Garden segment grew 3% to $111.1 million, benefiting from sturdy grass seed sales and strong sales witnessed across other manufacturers' products. Sales across the segment's branded product and other manufacturers' products came in at $88 million and $23.1 million, respectively. The segment recorded an operating loss of $3.3 million in the quarter, narrower than an operating loss of $3.5 million in the prior-year quarter.

Financial Details

Central Garden & Pet ended the quarter with cash and cash equivalents of $9 million, long-term debt of $435.9 million, and shareholders' equity of $498.4 million, excluding non-controlling interest of $481,000. Management incurred capital expenditures of $5 million during the quarter.

Other Stocks to Consider

Other well-ranked stocks include ConAgra Foods, Inc. CAG , Pinnacle Foods Inc. PF and The Kroger Co. KR . All these stocks hold a Zacks Rank #2 (Buy).

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CONAGRA FOODS (CAG): Free Stock Analysis Report

CENTRAL GARDEN (CENT): Free Stock Analysis Report

KROGER CO (KR): Free Stock Analysis Report

PINNACLE FOODS (PF): Free Stock Analysis Report

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


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

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