This lawn, garden, and pet supply company had a great third quarter. EPS was $1.27, a nice rise from the $0.80 cents reported last year, and also handily beat analysts’ estimates of $0.81. Sales also surpassed forecasts, coming in at $833.5 million, compared to the $720.6 million estimate, and an 18% improvement over last year.
Central Garden & Pet Company (CENT)
From Upside
Central Garden & Pet Company sells branded and private- label products for gardening (42% of 2019 sales) and pet care (58%). The coronavirus outbreak coincided with peak gardening season, which could weigh on June-quarter results. Still, Americans’ willingness to spend on their dogs and cats bodes well for growth.
Decent organic growth and acquisitions should help lift sales and earnings. Central Garden has acquired more than 50 companies over the past 25 years.
Central Garden shares have returned 18% so far in 2020, exceeding the slight gain for the S&P 1500 Index. Yet the stock seems reasonably priced, particularly given the company’s operating momentum. Shares trade at 23 estimated full-year earnings, an 11% discount to its industry group. Analyst estimates expect Central Garden will grow per-share profits by 1% in fiscal 2020 ending September and 9% next year.
The stock is being initiated as a Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, September 2020