Here's Why Central Garden & Pet (CENT) Q1 Earnings May Fall

Central Garden & Pet Company (NASDAQ:CENT) is scheduled to report first-quarter fiscal 2019 results on Feb 6, after market close. The company has outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 10.4%. In the last reported quarter, this producer and marketer of lawn & garden products and pet supplies delivered a positive earnings surprise of 11.1%. Let’s see what awaits this quarterly release.

How Are Estimates Faring?

The Zacks Consensus Estimate for first-quarter earnings is pegged at 9 cents, reflecting a sharp decline from 19 cents per share registered in the year-ago quarter. Notably, the consensus mark has remained stable over the past 30 days. For revenues, the consensus mark stands at $482.7 million, up approximately 9% from the year-ago quarter’s figure.

Central Garden & Pet Company Price, Consensus and EPS Surprise

Factors to Consider

Central Garden & Pet is revamping both the Pet and Garden segments. The company intends to have a balanced approach that encompasses revenue growth as well as cost reduction. Also, it plans to launch several products and upgrade customer service. These ongoing transformation efforts are expected to yield results.

Further, the company’s efforts to gain market share in home centers, mass market, grocery, specialty pet store and other independent channels are likely to have favorable impact on the quarter under review. The Zacks Consensus Estimate for revenues of the Garden and Pet segments are pegged at $125 million and $358 million for the to-be-reported quarter, which reflects a year-over-year increase of 6.8% and 10.2%, respectively.

Apart from these, the company is gaining from improved product offerings and strategic investments such as acquisitions of General Pet Supply and Bell Nursery. Further, the company purchased two small wholesale distributors of fish and small animals during fiscal 2018. Also, growth in e-commerce and cost containment efforts bode well.

However, rise in cost of goods sold and occupancy, higher interest expenses and seasonality of garden business remain concerns. Higher costs may keep margins under pressure. Moreover, interest expenses are anticipated to be higher due to the timing of debt issuance in December 2018. These will have a cumulative impact on the bottom line, which is likely to be substantially lower from the prior-year number.

What Does the Zacks Model Say?

Our proven model does not conclusively show that Central Garden & Pet is likely to beat estimates in first-quarter fiscal 2019. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Central Garden & Pet has an Earnings ESP of 0.00% and a Zacks Rank #3, which make surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

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

Costco Wholesale Corporation (NASDAQ:COST) has an Earnings ESP of +2.46% and a Zacks Rank #3.

Sally Beauty Holdings, Inc. (NYSE:SBH) has an Earnings ESP of +2.45% and a Zacks Rank #3.

Canada Goose Holdings Inc. (NYSE:GOOS) has an Earnings ESP of +14.04% and a Zacks Rank #3.

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