Central Garden & Pet Company (NASDAQ:CENT) just released its full-year report and things are looking bullish. Central Garden & Pet beat earnings, with revenues hitting US$2.7b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 14%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year. NasdaqGS:CENT Earnings and Revenue Growth November 25th 2020
Following the recent earnings report, the consensus from four analysts covering Central Garden & Pet is for revenues of US$2.62b in 2021, implying a measurable 2.7% decline in sales compared to the last 12 months. Statutory earnings per share are forecast to shrink 8.3% to US$2.05 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$2.62b and earnings per share (EPS) of US$2.05 in 2021. So it’s pretty clear that, although the analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of US$41.50, suggesting that the company has met expectations in its recent result. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Central Garden & Pet, with the most bullish analyst valuing it at US$44.00 and the most bearish at US$38.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 2.7% revenue decline a notable change from historical growth of 8.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 3.3% annually for the foreseeable future. It’s pretty clear that Central Garden & Pet’s revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Central Garden & Pet’s revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to come to a conclusion on Central Garden & Pet. Long-term earnings power is much more important than next year’s profits. We have forecasts for Central Garden & Pet going out to 2022, and you can see them free on our platform here.
And what about risks? Every company has them, and we’ve spotted 1 warning sign for Central Garden & Pet you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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