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Central Garden (CENT) Down 4.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Central Garden (CENT - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Central Garden due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Central Garden & Pet Q3 Earnings Top Estimates, View Up
Central Garden & Pet came up with third-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate, while the bottom line beat the same. Markedly, both net sales and earnings increased year over year.
Let’s Delve Deeper
Central Garden & Pet reported adjusted quarterly earnings of $1.75 per share, which came ahead of the Zacks Consensus Estimate of $1.45. The bottom line improved sharply from earnings of $1.39 per share reported in the year-ago period. On a GAAP basis, the company posted quarterly earnings of $1.56 per share.
The company generated net sales of $1,023 million, which fell short of the Zacks Consensus Estimate of $1,026 million. However, the metric improved 1% from the year-ago period.
The adjusted gross profit increased 6% to $326.1 million. Also, the adjusted gross margin expanded 160 basis points to 31.9%. We had expected a 60-basis point increase in the gross margin. The increase was driven by improved pricing, cost management and a favorable product mix.
Adjusted SG&A expenses of $189.3 million declined from $193.5 million in the prior-year quarter. As a percentage of net sales, it decreased 60 basis points to 18.5%.
The adjusted operating income totaled $136.8 million, up from the $114.1 million reported in the year-ago period. The operating margin expanded 220 basis points to 13.4%, driven by pricing actions, productivity efforts and lower commercial spend. Adjusted EBITDA increased 17.3% to $166 million from $141 million in the prior year.
Segment Details
Net sales in the Pet segment came in at $503 million, marginally down from $504.8 million reported in the year-ago period. We had expected segment net sales of $510 million. Strength in Dog & Cat Treats & Toys as well as Bird was offset by soft sales in Outdoor Cushions and the muted demand for durable pet products.
The segment’s adjusted operating income came in at $74 million, up 18% from the prior-year quarter. Meanwhile, the adjusted operating margin expanded 230 basis points to 14.7%, driven by improved pricing and cost management.
In the Garden segment, net sales increased 2% year over year to $520 million. We had expected segment net sales to be $516.9 million. Strength in Live Goods, Packet Seed and Wild Bird helped offset soft sales in Distribution and Grass Seed.
The segment’s operating income came in at $88 million, up from the $76 million reported in the prior-year quarter, while the operating margin expanded 210 basis points to 16.9% due to improved pricing, a favorable product mix and cost management.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $333.1 million, long-term debt of $1,187.5 million and shareholders’ equity of $1,445,530 million, excluding the non-controlling interest of $1.6 million. The company repurchased about 466,011 shares worth $16.7 million in the quarter under review. Management incurred capital expenditures of $11 million during the quarter under discussion, which was 54% below last year.
Outlook
Central Garden & Pet now estimates fiscal 2023 adjusted earnings to be $2.55 per share or better compared with the earlier forecast of $2.35 or better. The projection indicates macroeconomic uncertainty, inflationary pressure, changing customer behavior and unfavorable retailer inventory dynamics. It also suggests pricing actions and productivity initiatives across the board.
Meanwhile, management anticipates capital spending to be substantially lower than fiscal 2022. The company is anticipating capital expenditures in the band of $60 million-$70 million for fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -45.9% due to these changes.
VGM Scores
At this time, Central Garden has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Central Garden has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Central Garden (CENT) Down 4.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Central Garden (CENT - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Central Garden due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Central Garden & Pet Q3 Earnings Top Estimates, View Up
Central Garden & Pet came up with third-quarter fiscal 2023 results, wherein the top line missed the Zacks Consensus Estimate, while the bottom line beat the same. Markedly, both net sales and earnings increased year over year.
Let’s Delve Deeper
Central Garden & Pet reported adjusted quarterly earnings of $1.75 per share, which came ahead of the Zacks Consensus Estimate of $1.45. The bottom line improved sharply from earnings of $1.39 per share reported in the year-ago period. On a GAAP basis, the company posted quarterly earnings of $1.56 per share.
The company generated net sales of $1,023 million, which fell short of the Zacks Consensus Estimate of $1,026 million. However, the metric improved 1% from the year-ago period.
The adjusted gross profit increased 6% to $326.1 million. Also, the adjusted gross margin expanded 160 basis points to 31.9%. We had expected a 60-basis point increase in the gross margin. The increase was driven by improved pricing, cost management and a favorable product mix.
Adjusted SG&A expenses of $189.3 million declined from $193.5 million in the prior-year quarter. As a percentage of net sales, it decreased 60 basis points to 18.5%.
The adjusted operating income totaled $136.8 million, up from the $114.1 million reported in the year-ago period. The operating margin expanded 220 basis points to 13.4%, driven by pricing actions, productivity efforts and lower commercial spend. Adjusted EBITDA increased 17.3% to $166 million from $141 million in the prior year.
Segment Details
Net sales in the Pet segment came in at $503 million, marginally down from $504.8 million reported in the year-ago period. We had expected segment net sales of $510 million. Strength in Dog & Cat Treats & Toys as well as Bird was offset by soft sales in Outdoor Cushions and the muted demand for durable pet products.
The segment’s adjusted operating income came in at $74 million, up 18% from the prior-year quarter. Meanwhile, the adjusted operating margin expanded 230 basis points to 14.7%, driven by improved pricing and cost management.
In the Garden segment, net sales increased 2% year over year to $520 million. We had expected segment net sales to be $516.9 million. Strength in Live Goods, Packet Seed and Wild Bird helped offset soft sales in Distribution and Grass Seed.
The segment’s operating income came in at $88 million, up from the $76 million reported in the prior-year quarter, while the operating margin expanded 210 basis points to 16.9% due to improved pricing, a favorable product mix and cost management.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $333.1 million, long-term debt of $1,187.5 million and shareholders’ equity of $1,445,530 million, excluding the non-controlling interest of $1.6 million. The company repurchased about 466,011 shares worth $16.7 million in the quarter under review. Management incurred capital expenditures of $11 million during the quarter under discussion, which was 54% below last year.
Outlook
Central Garden & Pet now estimates fiscal 2023 adjusted earnings to be $2.55 per share or better compared with the earlier forecast of $2.35 or better. The projection indicates macroeconomic uncertainty, inflationary pressure, changing customer behavior and unfavorable retailer inventory dynamics. It also suggests pricing actions and productivity initiatives across the board.
Meanwhile, management anticipates capital spending to be substantially lower than fiscal 2022. The company is anticipating capital expenditures in the band of $60 million-$70 million for fiscal 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -45.9% due to these changes.
VGM Scores
At this time, Central Garden has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Central Garden has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.