A month has gone by since the last earnings report for PetMed Express, Inc. (NASDAQ:PETS) . Shares have lost about 9.8% in the past month, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is PETS due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
PetMed Express announced earnings per share (EPS) of 44 cents for the third quarter of fiscal 2018, up 83.3% from the year-ago quarter’s 24 cents. Also, earnings surpassed the Zacks Consensus Estimate by 33.3%. The year-over-year rise in earnings was driven by an increase in sales and improved margins.
Net sales in the reported quarter rose 13.7% year over year to $60.1 million, outpacing the Zacks Consensus Estimate by 5.4%.
Per this leading pet pharmacy in Americas, the upside in sales was a result of increased new orders and reorders during the quarter.
In the reported quarter, reorder sales increased 13.4% to $50.9 million on a year-over-year basis, while new order sales rose 15.5% to $9.2 million.
Average order value was approximately $86 in the quarter compared with $81 in the year-ago quarter. We note that the variation in average order value is mainly driven by a shift of sales to higher priced items.
Per the company, the seasonality in its business is mainly because of the proportion of flea, tick and heartworm medications in the product mix. Spring and summer are considered peak seasons while fall and winter represent off-seasons.
During the quarter under review, PetMed acquired 106,000 new customers, up from 99,000 a year ago. Roughly, 84% of all orders was generated from its website (versus 83% in the prior-year quarter).
Gross margin expanded 502 basis points (bps) year over year to 31.9% in the reported quarter. General and administrative expenses were up 8.5% year over year to $5.8 million. Also, advertising expenses rose 30.2% to $4.1 million. This led to a 16.6% increase in adjusted operating expenses (without depreciation expense), which amounted to $9.9 million. Nevertheless, adjusted operating margin in the quarter rose 462 bps to 19.9% from the year-ago quarter.
PetMed exited the fiscal third quarter with cash and cash equivalents of $80.9 million compared with $68.4 million at the end of the second-quarter fiscal 2017. The company also announced a 25% increase in quarterly dividend to 25 cents per share. The dividend will be payable to shareholders of record as of Feb 5, 2018.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, PETS has a great Growth Score of A, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, the stock was also allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
PETS has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
PetMed Express, Inc. (PETS): Free Stock Analysis Report
Original post
Zacks Investment Research