Central Garden & Pet's (CENT) Q1 Earnings: What's In Store?

Central Garden & Pet Company (NASDAQ:CENT) is slated to report first-quarter fiscal 2018 results on Feb 7, after the closing bell.

The question lingering in investors’ minds is, whether this leading lawn & garden and pet supplies’ producer and marketer will be able to pull off a positive earnings surprise in the to-be reported quarter. Last quarter, the company reported a negative earnings surprise of 20% after 12 straight quarters of earnings beat.

Let’s see how things are shaping up prior to the earnings announcement.

Estimates & Stock Performance

In order to get a clear picture of what analysts are thinking about the company right before earnings release, let’s have a look at the earnings estimate revisions.

The Zacks Consensus Estimate for the fiscal first quarter has inched up by a penny to 15 cents, in the last 30 days. Also, the estimate reflects year-over-year growth of 25% from 12 cents in the prior-year quarter.

Further, analysts polled by Zacks expect revenues of $434.3 million for the impending quarter, up nearly 3.5% from the year-ago quarter. Moreover, the consensus estimates for net sales at the Pet and the Garden segments are currently pegged at $315 million and $116 million, respectively. In the year-ago period, the company registered net sales of $304 million and $115.5 million for the Pet and the Garden segments, respectively.

The company forms part of the Consumer Discretionary sector. Per the Earnings Preview dated Jan 26, the sector’s earnings are expected to decline 1.4% year over year in fourth-quarter 2017 while revenues are likely to be up 3.6%.

In the past six months, shares of Central Garden & Pet have gained 22.8% against the industry’s decline of 9.1%.

Factors Influencing 1Q18

Organic growth, value accretive acquisitions and divestment of non-strategic assets have been the major strengths for Central Garden & Pet. Management is also revamping both the Pet and the Garden segments and aims to have a balanced approach that encompasses improvement in revenues through operational efficiency and cost reduction. Further, it intends to launch several products that appeal to customers as well as upgrade customer service.

These initiatives are likely to boost the company’s top line and overall profitability. Evidently, the company’s Pet segment recorded ninth successive quarter of organic sales growth in fourth-quarter fiscal 2017. This came on the back of robust performance at the dog & cat businesses. Additionally, Central Garden & Pet’s diversified portfolio of brands and effective inventory management are expected to drive growth.

Nevertheless, seasonality of garden business and cautious approach by customers toward discretionary spending remain concerns.

What Does the Zacks Model Unveil?

Our proven model does not show that Central Garden & Pet is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.

Central Garden & Pet has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 15 cents. The company carries a Zacks Rank #2, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

PVH Corp. (NYSE:PVH) has an Earnings ESP of +1.96% and a Zacks Rank #3.

Ralph Lauren Corporation (NYSE:RL) has an Earnings ESP of +0.98% and a Zacks Rank of 3.

The Home Depot, Inc. (NYSE:HD) has an Earnings ESP of +0.29% and a Zacks Rank #3.

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