On Jun 13, 2016, we issued an updated research report on PetMed Express (PETS Quick QuotePETS - Free Report) . This nationwide pet pharmacy presently carries a Zacks Rank #2 (Buy).

PetMed exhibited better-than-expected fourth-quarter fiscal 2016 performance, exceeding the Zacks Consensus Estimate on both lines. After several quarters of drag in new order sales, we are impressed with PetMed’s improved performance over the last two quarters.

In the fiscal fourth quarter, new order sales increased 24% to $9.4 million. In addition, reorder sales continued to show consistent growth, witnessing an 8.4% rise in the quarter to $46 million.

Further, average order size improved to $83 from $81 in the year-ago period on the back of a change in product mix to higher priced items and increased doses. The company is also working on issues like limited consumer spending and a change in product mix to lower priced items, mainly generics. The company is also asking veterinarians to prescribe more of their brands.

Although we are encouraged by PetMed’s efforts to revive the top line, barring the last two quarters, new order sales have been persistently sluggish over the last few quarters, hit by a reduction in advertising. Although the company is optimistic about the latest increase, the primary reason behind this is the unusually warm climate experienced last December compared to other years, which boosted sales. Hence, sustainability of this growth remains a concern.

Meanwhile, the company continues to face pressure in the competitive and fragmented pet medications market.

Key Picks from the Sector

Medical stocks such as ICU Medical, Inc. (ICUI Quick QuoteICUI - Free Report) , LeMaitre Vascular, Inc. (LMAT Quick QuoteLMAT - Free Report) and NuVasive, Inc. , all with a Zacks Rank #2, are expected to do well over the short term.

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