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CENT Declines 23% From 52-Week High: Will the Stock Rebound?
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Central Garden & Pet Company (CENT - Free Report) faced challenges over the last six months, in turn, experiencing a stock price decline of 13.1%. This stands in contrast with the broader industry and the S&P 500 index's rise of 14.2% and 3.6%, respectively.
Image Source: Zacks Investment Research
Closing at $36.65 yesterday, the stock moved down 22.7% from its 52-week high of $47.48 attained on May 15, 2024. Also, the stock has fallen below critical technical thresholds, including its 50-day and 200-day moving averages. This moving average is an important indicator for gauging market trends and momentum.
Image Source: Zacks Investment Research
The stock came under pressure following the company’s soft third-quarter 2024 results wherein both revenues and earnings declined year over year. The company faced challenges across its Pet and Garden segments, contributing to the decline. The company contends with uncertain consumer demand, shifting retailer dynamics and ongoing geopolitical challenges.
Reflecting the negative sentiment around CENT, the Zacks Consensus Estimate for fiscal 2024 and 2025 has seen downward revisions. In the past 60 days, analysts have lowered estimates for the current fiscal by 5.4% to $2.11 and for the next fiscal by 2.4% to $2.42 per share.
Image Source: Zacks Investment Research
Comprehensive Analysis of CENT Stock
The Pet segment is facing challenges, with organic net sales declining by 2.2% in the third quarter of fiscal 2024. The durable pet products category struggles due to reduced consumer spending and fewer new pet adoptions, despite some growth in consumable pet products. This ongoing pressure suggests that Central Garden & Pet may have difficulty maintaining overall sales growth in the Pet segment in the future.
The Garden segment negatively impacted the company's performance, with sales down 6.1% and organic net sales declining 3.7% in the fiscal third quarter. Adverse weather conditions, such as cold and wet weather followed by extreme heat, hurt live plant sales. Additionally, the sales of the independent garden channel distribution business, accounting for about 5% of Garden segment sales, further affected overall performance.
During the third quarter, the company reported lower foot traffic in its largest home center customers compared to the prior year and pre-COVID levels. This decline in foot traffic is concerning as it directly affects sales volumes, in the Garden segment. The reduced customer visits to key retail partners could lead to lower product turnover, increased inventory levels and the need for discounting to clear stock, all of which would negatively impact margins.
Adjusted operating margin contracted by 60 basis points to 12.8% in the third quarter. This contraction suggests that the company's profitability is under pressure, particularly as adjusted SG&A expenses rose by 4.9% compared to the previous year and deleveraged 140 basis points as a percentage of net sales. The increase in SG&A due to acquisitions and higher legal costs, has not been sufficiently offset by revenue growth or cost-cutting efforts.
The ongoing shift in consumer behavior, possibly driven by economic uncertainty or changing shopping preferences, poses a risk to the company's traditional sales channels and could result in sustained revenue pressure. Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share despite anticipating a one-time charge of $15-20 million in the fiscal fourth quarter.
CENT Stock Currently Looks Overvalued
Central Garden & Pet Company’s forward 12-month price-to-earnings ratio stands at 15.15, higher than the industry’s ratio of 10.93 and the S&P 500's 21.98. This elevated valuation indicates that investors may be paying a high price relative to the company's expected earnings growth.
Image Source: Zacks Investment Research
Investment Guidance on CENT Stock
Shares of Central Garden & Pet Company have struggled on the bourses of late, underperforming the industry. The dismal performance traces to macroeconomic pressures impacting consumer discretionary spending. These challenges were evident in third-quarter fiscal 2024 results, marked by a decline in revenues and earnings.
CENT faces headwinds in its Pet and Garden segments, compounded by external factors. To navigate the challenging environment, management is advancing with its cost and simplicity program, and investing in capacity expansion and automation. We believe that these endeavors will reap benefits over time. For now, existing investors should tread cautiously and evaluate whether to hold or adjust their positions in this Zacks Rank #4 (Sell) stock.
Don’t Miss These Solid Bets
The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, presently flaunts a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) , one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1% and 5%, respectively, from the year-ago reported numbers.
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CENT Declines 23% From 52-Week High: Will the Stock Rebound?
Central Garden & Pet Company (CENT - Free Report) faced challenges over the last six months, in turn, experiencing a stock price decline of 13.1%. This stands in contrast with the broader industry and the S&P 500 index's rise of 14.2% and 3.6%, respectively.
Image Source: Zacks Investment Research
Closing at $36.65 yesterday, the stock moved down 22.7% from its 52-week high of $47.48 attained on May 15, 2024. Also, the stock has fallen below critical technical thresholds, including its 50-day and 200-day moving averages. This moving average is an important indicator for gauging market trends and momentum.
Image Source: Zacks Investment Research
The stock came under pressure following the company’s soft third-quarter 2024 results wherein both revenues and earnings declined year over year. The company faced challenges across its Pet and Garden segments, contributing to the decline. The company contends with uncertain consumer demand, shifting retailer dynamics and ongoing geopolitical challenges.
Reflecting the negative sentiment around CENT, the Zacks Consensus Estimate for fiscal 2024 and 2025 has seen downward revisions. In the past 60 days, analysts have lowered estimates for the current fiscal by 5.4% to $2.11 and for the next fiscal by 2.4% to $2.42 per share.
Image Source: Zacks Investment Research
Comprehensive Analysis of CENT Stock
The Pet segment is facing challenges, with organic net sales declining by 2.2% in the third quarter of fiscal 2024. The durable pet products category struggles due to reduced consumer spending and fewer new pet adoptions, despite some growth in consumable pet products. This ongoing pressure suggests that Central Garden & Pet may have difficulty maintaining overall sales growth in the Pet segment in the future.
The Garden segment negatively impacted the company's performance, with sales down 6.1% and organic net sales declining 3.7% in the fiscal third quarter. Adverse weather conditions, such as cold and wet weather followed by extreme heat, hurt live plant sales. Additionally, the sales of the independent garden channel distribution business, accounting for about 5% of Garden segment sales, further affected overall performance.
During the third quarter, the company reported lower foot traffic in its largest home center customers compared to the prior year and pre-COVID levels. This decline in foot traffic is concerning as it directly affects sales volumes, in the Garden segment. The reduced customer visits to key retail partners could lead to lower product turnover, increased inventory levels and the need for discounting to clear stock, all of which would negatively impact margins.
Adjusted operating margin contracted by 60 basis points to 12.8% in the third quarter. This contraction suggests that the company's profitability is under pressure, particularly as adjusted SG&A expenses rose by 4.9% compared to the previous year and deleveraged 140 basis points as a percentage of net sales. The increase in SG&A due to acquisitions and higher legal costs, has not been sufficiently offset by revenue growth or cost-cutting efforts.
The ongoing shift in consumer behavior, possibly driven by economic uncertainty or changing shopping preferences, poses a risk to the company's traditional sales channels and could result in sustained revenue pressure. Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share despite anticipating a one-time charge of $15-20 million in the fiscal fourth quarter.
CENT Stock Currently Looks Overvalued
Central Garden & Pet Company’s forward 12-month price-to-earnings ratio stands at 15.15, higher than the industry’s ratio of 10.93 and the S&P 500's 21.98. This elevated valuation indicates that investors may be paying a high price relative to the company's expected earnings growth.
Image Source: Zacks Investment Research
Investment Guidance on CENT Stock
Shares of Central Garden & Pet Company have struggled on the bourses of late, underperforming the industry. The dismal performance traces to macroeconomic pressures impacting consumer discretionary spending. These challenges were evident in third-quarter fiscal 2024 results, marked by a decline in revenues and earnings.
CENT faces headwinds in its Pet and Garden segments, compounded by external factors. To navigate the challenging environment, management is advancing with its cost and simplicity program, and investing in capacity expansion and automation. We believe that these endeavors will reap benefits over time. For now, existing investors should tread cautiously and evaluate whether to hold or adjust their positions in this Zacks Rank #4 (Sell) stock.
Don’t Miss These Solid Bets
The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, presently flaunts a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) , one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings calls for growth of around 1% and 5%, respectively, from the year-ago reported numbers.