Does Central Garden & Pet Deserve a Place in Your Portfolio?

Central Garden & Pet CompanyCENT has been gaining from its robust strategies, spectacular earnings history and solid brand portfolio. Moreover, the company intends to take a balanced approach that include improvement in revenues and profits through operational efficiency as well as cost reduction.

Let's Dive Deep

Growth Drivers

Central Garden & Pet is revamping both its Pet and Garden segments. It also plans to launch several products that appeal to customers, along with upgrading its customer service. Management expects its ongoing transformation efforts to yield results in the near future. In fact, the company is expected to gain market share in the home centers, mass market, grocery, specialty pet store and other independent channels.

Evidently, the Pet and Garden segments reported revenue growth of 9.1% and 14.9% year over year, respectively, in the third quarter of fiscal 2017. Further, the company's Pet segment recorded eighth straight quarter of organic sales growth primarily owing to robust consumer brands performance.

Markedly, being the leading producer of garden and pet supplies products in the United States with a diversified portfolio of brands has aided Central Garden & Pet in developing healthy commercial relationships with giant retailers such as Walmart Stores, Inc. WMT , The Home Depot, Inc. HD and Lowe's Companies, Inc. LOW . We believe this provides the company significant opportunity to boost growth.

Solid Earnings History

Driven by its strategic efforts, Central Garden & Pet's bottom line has outpaced the Zacks Consensus Estimate for 12 straight quarters now. In fact, the company has delivered an impressive average earnings beat of 122.2% in the trailing four quarters. Further, the company boasts a long-term earnings growth rate of 10%.

Impressive Gross Margin Trend

Gross margin - an important financial metrics - that gives an indication about the company's health has shown constant improvement in the past five quarters. Improvement in gross margin can be attributed to the company's efforts toward improving manufacturing efficiency and exit from the holiday decor business, which was hampering the margin. Further, margin gains result from lower raw material costs.

In the first, second and third quarters of fiscal 2017 gross margin expanded 110, 90 and 10 basis points to 28.8%, 32.2% and 31.9%, respectively.

Bottom Line

Though stiff competition and seasonality of garden business may strain its margins, we believe that these headwinds will be easily offset by Central Garden & Pet's robust strategies.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Home Depot, Inc. (The) (HD): Free Stock Analysis Report

Lowe's Companies, Inc. (LOW): Free Stock Analysis Report

Central Garden & Pet Company (CENT): Free Stock Analysis Report

Wal-Mart Stores, Inc. (WMT): 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.

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

In This Story


Other Topics


Latest Markets Videos