Bearish View on Central Garden - Analyst Blog
September 09 2013 - 2:00PM
Zacks
On Sep 3, we downgraded our
long-term recommendation on Central Garden & Pet
Company (CENT) to Underperform based on the company’s
dismal third-quarter 2013 performance. The stock currently carries
a Zacks Rank #5 (Strong Sell).
Why the
Downgrade?
Estimates for Central Garden &
Pet have shown a downtrend since the company reported disappointing
third-quarter results on Aug 7, 2013.
The company’s dismal performance
continued even in the third quarter. The quarterly earnings of 28
cents a share missed the Zacks Consensus Estimate of 42 cents by
miles and plunged 40.4% year over year. Top line also decreased 7%
year over year to $494.1 million and fell short of the Zacks
Consensus Estimate of $525 million. Decline in both Pet and Garden
segments and tough year-over-year comparisons were to blame. Lower
sales led to a fall in consolidated gross profit.
We observe that the Central Garden
& Pet’s transformation activities are failing to show the
desired results and therefore we remain skeptical about the future
prospects of the company as the lack of improvement is dashing all
hopes of recovery, at least in the near term. The company’s poor
performance is evident from its earnings surprise history.
The company has missed the Zacks
Consensus Estimate in the trailing 4 quarters by an average of
16.5%, which is a matter of concern. The lower-than-expected
results triggered a downtrend in the Zacks Consensus Estimate, as
analysts become less constructive on the stock’s future
performance. This is evident from the movement witnessed in the
Zacks Consensus Estimate that dipped 35.9% to 25 cents for 2013 and
8.1% to 57 cents a share for 2014 in the past 60 days.
Other Stocks that Warrant a
Look
Not all retail stocks are
performing as disappointingly as Central Garden & Pet. Other
stocks worth considering include Citi Trends, Inc.
(CTRN), Fortune Brands Home & Security, Inc.
(FBHS) and Lumber Liquidators Holdings, Inc. (LL),
all sporting a Zacks Rank #1 (Strong Buy).
CENTRAL GARDEN (CENT): Free Stock Analysis Report
CITI TRENDS INC (CTRN): Free Stock Analysis Report
FORTUNE BRD H&S (FBHS): Free Stock Analysis Report
LUMBER LIQUIDAT (LL): Free Stock Analysis Report
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