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Central Garden & Pet Looks Promising: Invest in the Stock

Zacks

Central Garden & Pet Company CENT has outperformed the Zacks categorized Consumer Product-Miscellaneous Discretionary industry in the past one year, with year-to-date gain of 135% compared with 18.1% for the latter. This growth can mainly be attributed to the company’s strategic initiatives, solid earnings surprise history and upward estimates trend.

Further, we believe that the Zacks Rank #1 (Strong Buy) company offers a sound investment opportunity, as evident from its VGM Score of “A” and long-term earnings growth rate of 10%.

Sturdy Fundamental

Central Garden & Pet is revamping both Pet and Garden segments. The company intends to have a balanced approach that encompasses revenue growth as well as cost reduction. Further, it intends to launch several products that appeal to customers, as well as upgrade customer service. Management expects the company’s ongoing transformation efforts to yield results in the near future. Further, it intends to gain market share in the home centers, mass market, grocery, specialty pet store and other independent channels.


Being the leading producer of garden and pet supplies products in the U.S. with a diversified portfolio of brands has aided Central Garden & Pet in developing healthy commercial relationships with giant retailers such as Wal-Mart, Home Depot and Lowe’s. We believe this provides the company significant opportunity to drive growth. Sales to Wal-Mart accounted approximately 31%, Home Depot represented approximately 19% and Lowe’s accounted about 20% in fiscal 2016.

Robust Earnings

Central Garden & Pet continued with its positive earnings surprise streak for the tenth consecutive quarter, when it reported the first quarter of fiscal 2017 results. In the first quarter, the company posted adjusted earnings of 12 cents per share beat the Zacks Consensus Estimate of 3 cents and increased sharply from the year-ago figure of 1 cent.

More than half of the company’s earnings growth can be attributed to recent two acquisitions of Segrest and DMC, favorable timing of revenues and effective cost management. Management now envisions fiscal 2017 earnings per share of $1.34 or higher, up approximately 6% from the prior year.

Central Garden & Pet Company Price, Consensus and EPS Surprise

Central Garden & Pet Company Price, Consensus and EPS Surprise | Central Garden & Pet Company Quote

Upward Estimate Revision

Let’s look at Central Garden & Pet’s earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company. In the past 30 days, the Zacks Consensus Estimate for fiscal 2017 and 2018 has increased 2.2% and 2% to $1.39 and $1.56, respectively.

Other Stocks to Consider

Some other favorably placed stocks which warrant a look in the retail sector include Barnes & Noble, Inc. BKS, Cabela's Inc. CAB and Staples, Inc. SPLS. All these stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barnes & Noble has an impressive long-term earnings growth rate of 10%.

Cabela's has long-term earnings growth rate of 12.5%.

Shares of Staples have gained nearly 7% in the past three months.

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