Earnings Preview: Central Garden - Analyst Blog
August 01 2011 - 12:00PM
Zacks
Central Garden & Pet Company (CENT), one of
the leading producers and marketers of premium and value-oriented
products, is slated to report its third-quarter 2011 financial
results on August 3, 2011. The current Zacks Consensus Estimate for
the quarter is 47 cents a share. For the quarter to be reported,
the Zacks Consensus Estimate for revenue is $489 million.
Second-Quarter 2011, a Synopsis
Central Garden & Pet Company delivered a quarterly income of
54 cents a share, beating the Zacks Consensus Estimate and
prior-year quarter’s income of 49 cents.
Central Garden & Pet witnessed total revenue increase of
10.0% to $485.7 million, reflecting significant sales growth in
garden products segment. The company’s total branded product sales
climbed 13.0% to $417.3 million, whereas sales of other
manufacturers’ products went down 7.6% to $68.4 million.
The reported net sales also surpassed the Zacks Consensus
Revenue Estimate of $457.0 million.
Third-Quarter 2011 Zacks Consensus
Analysts considered by Zacks expect Central Garden to post
third-quarter 2011 earnings of 47 cents a share. The current Zacks
Consensus Estimate is 17.5%, up from the prior-year quarter
earnings. The current Zacks Consensus Estimates for the quarter
ranges between 45 cents and 48 cents.
Zacks Agreement & Magnitude
None of the analysts revised the estimates in the last 7 and 30
days keeping the Zacks Consensus Estimate stable for the third
quarter of 2011.
Mixed Earnings Surprise History
With respect to earnings surprises, Central Garden has missed as
well as topped the Zacks Consensus Estimate over the last four
quarters in the range of negative 114.3% to positive 10.2%. The
average remained at negative 43.3%.
Our View
Central Garden’s diversified portfolio of brands has helped it
to develop a healthy commercial relationship with giant retailers,
such as Wal-Mart Stores Inc. (WMT) and The
Home Depot Inc. (HD). This provides a significant upside
potential to the company.
The company’s effective inventory management is helping it to
optimize merchandise levels in accordance with the sales trends.
Further, Central Garden & Pet is implementing an
enterprise-wide information technology platform, which is expected
to improve working capital management.
The company has been focusing on improving its gross and
operating margins. To achieve its goal, Central Garden & Pet
has tried every means to improve its sales, consolidate
manufacturing facilities and logistics centers. Further, the
company has made prudent capital investments while focusing on
improving manufacturing efficiencies.
However, the discretionary spending environment continues to
remain sluggish amid high unemployment levels and tight credit
markets. This is especially a matter of concern for the company as
a significant portion of its product portfolio consists of premium
offerings.
Currently, we maintain a long-term Outperform recommendation on
the stock. Moreover, Central Garden & Pet holds a Zacks #3
Rank, which translates into a short-term Hold rating.
CENTRAL GARDEN (CENT): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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