Central Garden Held at Underperform - Analyst Blog
19 March 2013 - 3:55AM
Zacks
We have maintained our long-term Underperform recommendation on
Central Garden & Pet Company (CENT) with a
target price of $8.00, as it continues to perform disappointingly
as evident from its sluggish quarterly results.
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. (SPB) and
PetMed Express, Inc. (PETS), both of which hold a
Zacks Rank #1 (Strong Buy) and are expected to continue with its
upbeat performance. Prestige Brands Holdings, Inc.
(PBH) carrying a Zacks Rank #2 (Buy) is also worth considering.
CENTRAL GARDEN (CENT): Free Stock Analysis Report
PRESTIGE BRANDS (PBH): Free Stock Analysis Report
PETMED EXPRESS (PETS): Free Stock Analysis Report
SPECTRUM BRANDS (SPB): Free Stock Analysis Report
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