Shutterstock photoCentral 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.
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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.
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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.
