Central Garden & Pet Company CENTcontinued with its upbeat performance in the second quarter of fiscal 2018 as well and also provided an encouraging earnings view. This California-based company delivered positive earnings surprise of 4.9% in the quarter under review following earnings beat of 26.
7% in the preceding quarter. The top line also continues to impress investors, beating the consensus estimate for sixth straight quarter.Improved product offerings, strategic investments such as acquisitions of General Pet Supply and Bell Nursery, growth in e-commerce and cost containment efforts bode well for the company. These have led this Zacks Rank #3 (Hold) stock to advance roughly 3% in the past six months, against the industry’s decline of approximately 5%.
The producer and distributor of products for the lawn and garden and pet supplies markets delivered earnings of 86 cents a share that surpassed the Zacks Consensus Estimate of 82 cents. The quarterly earnings surged 28.4% from 67 cents reported in the year-ago period.
Management highlighted that higher net sales, lower effective tax rate, changes in accounting standards and rise in other income from joint venture investments positively impacted the bottom line.
Net sales of $613.1 million came ahead of the Zacks Consensus Estimate of $587 million and grew 7.6% year over year. The increase in sales was primarily driven by robust organic growth across both the Garden and Pet segments. The company’s organic sales rose 6. 1%.
Gross profit jumped 6% to $194.5 million, however, gross margin contracted 50 basis points (bps) to 31.7%. The company hinted that a shift in sales mix in the Pet segment and higher raw materials and freight costs hurt the margin. Operating income came in at $65.8 million, up 3% from the prior-year quarter, however, operating margin shriveled 50 bps to 10.7% in the quarter under review on account of lower gross margin.