On Sep 3, 2013, Zacks Investment Research downgraded Central Garden & Pet Company (CENT) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Estimates for Central Garden & Pet have shown a downtrend since the company reported disappointing third-quarter results on Aug 7, 2013.
The company’s dismal performance continued into the third quarter. The quarterly earnings of 28 cents a share missed the Zacks Consensus Estimate of 42 cents by miles and plunged 40.4% year over year. Top line also decreased 7% year over year to $494.1 million and fell short of the Zacks Consensus Estimate of $525 million. Decline in both the Pet and Garden segments and tough year-over-year comparisons were to blame. Lower sales led to a fall in consolidated gross profit.
We observe that Central Garden & Pet’s transformation activities are failing to show the desired results and therefore we remain skeptical about the future prospects of the company as the lack of improvement is dashing all hopes of recovery, at least in the near term. The company’s poor performance is evident from its earnings surprise history.
Central Garden & Pet has missed the Zacks Consensus Estimate in the trailing 4 quarters by an average of 16.5%, which is a matter of concern. The lower-than-expected results triggered a downtrend in the Zacks Consensus Estimates, as analysts become less constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that dipped 35.9% to 25 cents for 2013 and 8.1% to 57 cents a share for 2014 in the past 60 days.
Other Stocks that Warrant a Look
Not all retail stocks are performing as disappointingly as Central Garden & Pet. Other stocks worth considering include Citi Trends, Inc. (CTRN), Fortune Brands Home & Security, Inc. (FBHS) and Lumber Liquidators Holdings, Inc. (LL), all sporting a Zacks Rank #1 (Strong Buy).
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