Central Garden & Pet Looks Promising: Will it be Your Pick?

When we bet on a stock, we always try to hit the jackpot. But striking the right chord each time needs a fair amount of luck. A favorable event lures investors, while an unfavorable one drives them away from the market. The overall commotion in the financial arena triggered by the Brexit vote is making it tough for investors to arrive at an investment decision.

Thus, it would be feasible on your part to enrich your portfolio with stocks that have solid fundamentals and could provide a sound investment opportunity. Here we have highlighted one such stock – Central Garden & Pet Company CENT – that looks promising and sports a Zacks Rank #1 (Strong Buy), with a long-term earnings growth rate of 10%. We have analyzed a few basic aspects of the stock that has more than doubled over the past one year.

Sturdy Fundamentals Underscore Potential

Central Garden & Pet Company is revamping both its Pet and Garden segments. Also, the company intends to have a balanced approach that encompasses an improvement in revenues and profits through operational efficiency.

Organic growth, value accretive acquisitions such as that of the pet bedding business, and divestment of non-strategic assets have been helping the company to enhance its portfolio, thereby leading to better performance. Additionally, Central Garden & Pet Company 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 helped the company develop healthy commercial relationships with retails giants such as Wal-Mart Stores Inc. WMT, The Home Depot, Inc. HD and Lowe's Companies, Inc. LOW.

Positive Earnings Surprise History

Central Garden & Pet Company continued with its positive earnings surprise streak for the seventh consecutive quarter, as it reported second-quarter fiscal 2016 results, prompting management to raise its earnings outlook for the fiscal. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 66.3%, including a positive earnings surprise of 10.2% in the last concluded quarter.

The company posted second-quarter adjusted earnings of 65 cents a share that beat the Zacks Consensus Estimate of 59 cents and surged 38.3% year over year. The better-than-expected results were driven by improved top-line performance and effective cost-containment efforts. Net sales advanced 8.8% year over year to $541.2 million and outdid the Zacks Consensus Estimate of $528 million, thus helping the company mark its fourth successive quarter of revenue beat.

Management now envisions fiscal 2016 adjusted earnings to increase at least 49% to $1.10 per share or higher. Earlier, the company had projected a 35% rise in adjusted earnings per share to at least $1.00.

Favorable Estimate Revisions

Following Central Garden & Pet Company’s sturdy performance and encouraging outlook, the Zacks Consensus Estimate witnessed an uptrend as analysts raised their estimates. Analysts polled by Zacks are convinced about the stock’s upbeat performance in the future. Over the past 60 days, the Zacks Consensus Estimate of $1.13 and $1.26 for fiscal 2016 and fiscal 2017 has increased 5 cents and 8 cents, respectively.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research