Core Insights - Central Garden (CENTA) reported quarterly earnings of $1.04 per share, exceeding the Zacks Consensus Estimate of $0.94 per share, and up from $0.99 per share a year ago, representing an earnings surprise of 10.64% [1] - The company posted revenues of $833.54 million for the quarter ended March 2025, which missed the Zacks Consensus Estimate by 4.76% and decreased from $900.09 million year-over-year [2] - Central Garden has surpassed consensus EPS estimates in all four of the last quarters, but has only topped revenue estimates once in the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.32 on revenues of $1.01 billion, and for the current fiscal year, it is $2.37 on revenues of $3.23 billion [7] - The estimate revisions trend for Central Garden is mixed, leading to a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Consumer Products - Discretionary industry, to which Central Garden belongs, is currently ranked in the bottom 32% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Central Garden's stock performance [5]

[Q2 Fiscal 2025 Financial Results and Outlook](index=1&type=section&id=Q2_Fiscal_2025_Financial_Results_and_Outlook) [Financial Highlights](index=1&type=section&id=Financial_Highlights) In the second quarter of fiscal 2025, Central Garden & Pet experienced a **7%** decrease in net sales to **$834 million**, attributed to softer demand and timing shifts in customer orders, while improving profitability through its Cost and Simplicity program, leading to a **180 basis point** expansion in gross margin to **32.8%** and a **$0.05** increase in both GAAP and non-GAAP EPS to **$0.98** and **$1.04**, respectively Q2 Fiscal 2025 Key Financial Metrics (vs. Q2 Fiscal 2024) | Metric | Q2 FY2025 ($ millions) | Q2 FY2024 ($ millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $834 | $900 | -7% | | Gross Profit | $273 | $279 | -2% | | Gross Margin | 32.8% | 31.0% | +180 bps | | Operating Income | $93 | $93 | 0% | | Operating Margin | 11.2% | 10.4% | +80 bps | | Net Income | $64 | $62 | +3% | | GAAP Diluted EPS | $0.98 | $0.93 | +$0.05 | | Non-GAAP Diluted EPS | $1.04 | $0.99 | +$0.05 | - Profitability improvements were primarily driven by productivity efforts from the company's Cost and Simplicity program, which helped expand gross and operating margins despite lower sales volume[2](index=2&type=chunk)[3](index=3&type=chunk) [Segment Performance](index=2&type=section&id=Segment_Performance) Both the Pet and Garden segments saw sales declines in Q2, with the Pet segment's sales falling **6%** due to order timing and softer demand, and the Garden segment's sales dropping **10%** because of a shift in pre-season orders, unfavorable weather, and product line losses, though both segments improved their operating margins through productivity initiatives [Pet Segment](index=2&type=section&id=Pet_Segment) - Net sales decreased by **6%** to **$454 million**, mainly due to the timing of customer orders shifting to Q1, assortment rationalization, and softer demand in durable pet products[10](index=10&type=chunk) Pet Segment Q2 Financials (vs. Q2 FY2024) | Metric | Q2 FY2025 | Change | | :--- | :--- | :--- | | Net Sales ($ millions) | $454 | -6% | | GAAP Operating Income ($ millions) | $61 | -3% | | GAAP Operating Margin | 13.4% | +40 bps | | Non-GAAP Operating Income ($ millions) | $66 | +5% | | Non-GAAP Operating Margin | 14.5% | +150 bps | | Adjusted EBITDA ($ millions) | $75 | +$2 | [Garden Segment](index=2&type=section&id=Garden_Segment) - Net sales decreased by **10%** to **$380 million**, primarily caused by customers shifting pre-season orders into Q1, a late-breaking spring selling season due to weather, and the loss of two product lines in the third-party distribution business[13](index=13&type=chunk) Garden Segment Q2 Financials (vs. Q2 FY2024) | Metric | Q2 FY2025 | Change | | :--- | :--- | :--- | | Net Sales ($ millions) | $380 | -10% | | GAAP Operating Income ($ millions) | $59 | +3% | | GAAP Operating Margin | 15.5% | +190 bps | | Adjusted EBITDA ($ millions) | $69 | -$4 | [Fiscal 2025 Guidance](index=3&type=section&id=Fiscal_2025_Guidance) Central Garden & Pet reaffirmed its fiscal 2025 outlook, expecting non-GAAP EPS to be **$2.20** or better, considering potential shifts in consumer behavior, retail landscape challenges, and weather variability, while anticipating capital expenditures of approximately **$60 million** for the fiscal year - The company reaffirmed its fiscal 2025 non-GAAP EPS guidance of **$2.20 or better**[20](index=20&type=chunk) - The outlook accounts for macroeconomic uncertainty, challenges in brick-and-mortar retail, and weather variability[20](index=20&type=chunk) - Anticipated capital expenditures for fiscal 2025 are approximately **$60 million**[21](index=21&type=chunk) [Financial Position and Corporate Initiatives](index=2&type=section&id=Financial_Position_and_Corporate_Initiatives) [Liquidity, Debt, and Capital Allocation](index=2&type=section&id=Liquidity_Debt_and_Capital_Allocation) The company maintained a strong liquidity position with a cash balance of **$517 million**, a significant improvement from the prior year driven by earnings and inventory reduction, while total debt remained stable at **$1.2 billion** with a gross leverage ratio of **2.9x**, and actively returned capital to shareholders by repurchasing **$41 million** of stock during the quarter and an additional **$39 million** after the quarter's end - Cash and cash equivalents at quarter-end were **$517 million**, an increase of **$215 million** year-over-year, attributed to earnings and inventory reduction efforts[15](index=15&type=chunk) - Total debt was stable at **$1.2 billion**, and the gross leverage ratio was **2.9x**, in line with the prior-year quarter[16](index=16&type=chunk) - The company repurchased **1.2 million shares** for **$41 million** during Q2 and an additional **1.2 million shares** for **$39 million** through April 30, 2025[17](index=17&type=chunk) [Cost and Simplicity Program](index=3&type=section&id=Cost_and_Simplicity_Program) Central is making significant progress with its multi-year Cost and Simplicity program, aimed at streamlining operations and improving efficiency, with a key action in Q2 being the decision to wind down operations in the United Kingdom and transition to a direct-export model, resulting in initial non-cash charges of **$5.3 million** within the Pet segment - The company is executing a multi-year Cost and Simplicity program to streamline operations across procurement, manufacturing, logistics, and administration[18](index=18&type=chunk) - In Q2, Central began winding down its UK operations to move to a direct-export model, incurring **$5.3 million** in initial costs (**$4.4 million** in COGS, **$0.9 million** in SG&A), all of which was non-cash[19](index=19&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Condensed_Consolidated_Financial_Statements) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed_Consolidated_Balance_Sheets) As of March 29, 2025, total assets were **$3.63 billion**, a slight increase from **$3.54 billion** a year prior, driven by a significant rise in cash and cash equivalents to **$517 million** from **$301 million**, partially offset by a decrease in inventories, while total liabilities remained relatively stable and total equity increased slightly to **$1.54 billion** Selected Balance Sheet Data (in thousands) | Account | March 29, 2025 | March 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $516,675 | $301,332 | | Inventories, net | $824,281 | $914,352 | | Total current assets | $1,975,253 | $1,850,618 | | Total assets | $3,629,617 | $3,540,018 | | **Liabilities & Equity** | | | | Total current liabilities | $597,651 | $556,490 | | Long-term debt | $1,190,724 | $1,188,955 | | Total liabilities | $2,086,213 | $2,027,851 | | Total equity | $1,543,404 | $1,512,167 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed_Consolidated_Statements_of_Operations) For the three months ended March 29, 2025, net sales decreased **7.4%** to **$833.5 million** compared to the prior-year period, yet cost management led to a higher gross margin (**32.8%** vs **31.0%**), stable operating income of **$93.3 million**, and a **2.7%** increase in net income attributable to the company to **$63.6 million** Consolidated Statement of Operations - Three Months Ended (in thousands) | Account | March 29, 2025 | March 30, 2024 | | :--- | :--- | :--- | | Net sales | $833,537 | $900,090 | | Gross profit | $273,083 | $278,880 | | Operating income | $93,324 | $93,447 | | Income before income taxes | $84,710 | $81,803 | | Net income attributable to Central | $63,633 | $61,987 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed_Consolidated_Statements_of_Cash_Flows) For the six months ended March 29, 2025, net cash used by operating activities was **$115.7 million**, an increase from **$94.3 million** in the prior year, primarily due to changes in working capital like accounts receivable, while net cash used in investing activities decreased significantly to **$20.2 million** from **$80.3 million**, and financing activities used **$99.7 million**, mainly for stock repurchases Cash Flow Summary - Six Months Ended (in thousands) | Activity | March 29, 2025 | March 30, 2024 | | :--- | :--- | :--- | | Net cash used by operating activities | $(115,695) | $(94,302) | | Net cash used in investing activities | $(20,203) | $(80,286) | | Net cash used by financing activities | $(99,724) | $(13,171) | | Net decrease in cash | $(237,066) | $(187,344) | [Non-GAAP Financial Measures and Reconciliations](index=9&type=section&id=Non-GAAP_Financial_Measures_and_Reconciliations) The company uses non-GAAP measures like non-GAAP net income, non-GAAP operating income, and adjusted EBITDA to supplement GAAP results, arguing they provide a better assessment of ongoing performance by excluding infrequent items, with the primary adjustment for Q2 2025 being a **$5.3 million** charge related to the wind-down of UK operations, resulting in non-GAAP net income of **$67.7 million** compared to GAAP net income of **$63.6 million** - Management uses non-GAAP measures to exclude specific items, such as facility closure costs, to aid in financial planning and performance evaluation[37](index=37&type=chunk)[39](index=39&type=chunk) Q2 Net Income Reconciliation: GAAP to Non-GAAP (in thousands) | Description | Q2 FY2025 | Q2 FY2024 | | :--- | :--- | :--- | | GAAP net income attributable to Central | $63,633 | $61,987 | | Facility closures | $5,339 | $5,270 | | Tax effect of adjustments | $(1,255) | $(1,233) | | **Non-GAAP net income attributable to Central** | **$67,717** | **$66,024** |

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - Central Garden (CENTA) is highlighted as a recommended growth stock based on the Zacks Growth Style Score, which evaluates a company's genuine growth potential beyond traditional metrics [2] - The company currently holds a favorable Growth Score and a top Zacks Rank, indicating strong investment potential [2] Group 2: Earnings Growth - Earnings growth is crucial for investors, with double-digit growth being particularly desirable as it signals strong future prospects [4] - Central Garden's projected EPS growth for the current year is 11.3%, significantly outperforming the industry average of 3.2% [5] Group 3: Cash Flow Growth - High cash flow growth is essential for growth-oriented companies, allowing them to fund new projects without relying on external financing [6] - Central Garden's year-over-year cash flow growth stands at 8.7%, exceeding the industry average of 4.5% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 11.4%, compared to the industry average of 9.3% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions are indicative of potential stock price movements [8] - The current-year earnings estimates for Central Garden have been revised upward, with the Zacks Consensus Estimate increasing by 0.1% over the past month [8] Group 5: Conclusion - Central Garden has achieved a Growth Score of B and a Zacks Rank of 2, reflecting positive earnings estimate revisions and strong growth metrics [9] - This combination positions Central Garden as a potential outperformer and a solid choice for growth investors [10]

Group 1 - Central Garden (CENTA) shares have increased by 1.5% over the past four weeks, closing at $32.26, with a mean price target of $41.83 indicating a potential upside of 29.7% [1] - The average price targets from analysts range from a low of $31 to a high of $50, with a standard deviation of $6.31, suggesting variability in estimates [2] - Analysts are optimistic about CENTA's earnings prospects, as indicated by a positive trend in earnings estimate revisions, which historically correlates with stock price movements [4][10] Group 2 - The Zacks Consensus Estimate for the current year has increased by 0.1% over the past month, with one estimate rising and no negative revisions [11] - CENTA holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates, indicating strong potential for upside [12] - While consensus price targets may not be reliable for predicting exact gains, they can provide a directional guide for price movement [12]

Group 1 - Central Garden (CENTA) shares have increased by 0.2% over the past four weeks, closing at $31.32, with a mean price target of $42.20 indicating a potential upside of 34.7% [1] - The average price targets from analysts range from a low of $34 to a high of $50, with a standard deviation of $5.93, suggesting a variability in estimates [2] - Analysts show strong agreement on CENTA's ability to report better earnings, with a positive trend in earnings estimate revisions correlating with potential stock price increases [4][9] Group 2 - Over the last 30 days, the Zacks Consensus Estimate for CENTA's current year earnings has increased by 6.8%, with three estimates moving higher and no negative revisions [10] - CENTA holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimates [11] - While consensus price targets may not be reliable for predicting the extent of gains, they can provide a directional guide for price movement [12]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves navigating inherent risks and volatility [1] Group 1: Company Overview - Central Garden (CENTA) is currently highlighted as a recommended growth stock, benefiting from a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 5.1%, with projected EPS growth of 9.1% this year, surpassing the industry average of 8.6% [4] Group 2: Financial Metrics - Central Garden's year-over-year cash flow growth stands at 8.7%, significantly higher than the industry average of 1.8% [5] - The company's annualized cash flow growth rate over the past 3-5 years is 11.4%, compared to the industry average of 3.6% [6] Group 3: Earnings Estimates - The current-year earnings estimates for Central Garden have increased by 7.1% over the past month, indicating a positive trend in earnings estimate revisions [8] - The combination of a Growth Score of B and a Zacks Rank 1 suggests that Central Garden is positioned as a potential outperformer for growth investors [10]

Group 1 - Central Garden & Pet Company (CENTA) is experiencing significant activity in the options market, particularly with the March 21, 2024 $20 Put showing high implied volatility, indicating potential for a major price movement [1] - Implied volatility reflects market expectations for future stock movement, suggesting that investors anticipate a significant event that could lead to a rally or sell-off [2] - Analysts have a mixed outlook on Central Garden & Pet Company, with no earnings estimates increased in the last 60 days and three analysts reducing their estimates, leading to a decrease in the Zacks Consensus Estimate from $1.01 to $0.95 per share [3] Group 2 - The high implied volatility may indicate a developing trading opportunity, as options traders often seek to sell premium on such options, hoping the stock does not move as much as expected by expiration [4]

Core Viewpoint - Central Garden (CENTA) shares have increased by 10.1% in the past four weeks, closing at $32.86, with a potential upside indicated by Wall Street analysts' price targets suggesting a mean estimate of $41.60, representing a 26.6% upside [1] Price Targets - The average price target consists of five short-term estimates ranging from a low of $31 to a high of $50, with a standard deviation of $7.02, indicating variability among analysts [2] - The lowest estimate suggests a decline of 5.7% from the current price, while the highest estimate indicates a potential upside of 52.2% [2] Analyst Sentiment - There is strong agreement among analysts regarding CENTA's ability to report better earnings than previously predicted, which supports the view of potential upside [4] - The Zacks Consensus Estimate for the current year has risen by 7.1% over the past month, with two estimates increasing and no negative revisions [10] Zacks Rank - CENTA holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate factors, indicating a strong potential upside [11] Earnings Estimate Revisions - Increasing optimism among analysts about CENTA's earnings prospects is reflected in the upward revisions of EPS estimates, which have shown a strong correlation with near-term stock price movements [9]

Financial Performance - The total net sales for the three months ended December 28, 2024, were $656.4 million, an increase from $634.5 million for the same period in 2023, representing a growth of approximately 3.4%[93] - The Pet segment generated net sales of $427.5 million, up from $409.2 million, while the Garden segment saw sales increase from $225.3 million to $229.0 million[93] - Operating income for the total company was $28.0 million for the three months ended December 28, 2024, compared to $8.4 million in the prior year, indicating a significant improvement[93] - Net income attributable to Central Garden & Pet Company was $14.0 million for the three months ended December 28, 2024, compared to $430,000 for the same period in 2023, reflecting a substantial increase[93] - The company reported a basic earnings per share (EPS) of $0.22 for the three months ended December 28, 2024, compared to $0.01 for the same period in 2023[89] - Total revenue for the three months ended December 28, 2024, was $656.4 million, an increase from $634.5 million for the same period in 2023, representing a growth of approximately 3.1%[95] - The Pet Segment generated $427.5 million in revenue for the three months ended December 28, 2024, compared to $409.2 million in the same period of 2023, reflecting a growth of about 4.9%[95] - The Garden Segment reported revenues of $228.9 million for the three months ended December 28, 2024, up from $225.3 million in the same period of 2023, indicating a growth of approximately 1.6%[95] Cash and Cash Equivalents - The company reported cash and cash equivalents of $618,020 thousand as of December 28, 2024, compared to $341,419 thousand on December 30, 2023, indicating a significant increase of 81.0%[36] - Total cash, cash equivalents, and restricted cash amounted to $632,669 thousand as of December 28, 2024, up from $355,619 thousand a year earlier, reflecting an increase of 77.7%[36] Acquisitions and Goodwill - The company acquired TDBBS, LLC for approximately $60 million, enhancing its portfolio in the pet segment and eCommerce capabilities[54] - The company reported goodwill of $4,925 thousand as part of the acquisition of TDBBS, reflecting the premium paid over the net tangible assets acquired[56] Debt and Liabilities - The Company has long-term debt totaling $1,190.4 million as of December 28, 2024, which is slightly up from $1,189.6 million as of December 30, 2023[66] - The Company incurred approximately $6 million in debt issuance costs related to the issuance of $400 million 5.125% Senior Notes due 2031[69] - The Company has $300 million in Senior Notes due February 2028, $500 million in Senior Notes due October 2030, and $400 million in Senior Notes due April 2031, all with a fixed interest rate of 5.125%[66] - The Company’s total liabilities include current liabilities of $9,094 thousand and long-term lease liabilities of $3,727 thousand related to the acquisition of TDBBS[56] Inventory and Assets - Total inventories, net, decreased to $815,782 thousand as of December 28, 2024, from $948,398 thousand on December 30, 2023, representing a decline of 14.0%[57] - The company had total assets of $3.54 billion as of December 28, 2024, an increase from $3.42 billion a year earlier[93] Intangible Assets - The Company recorded total other intangible assets, net of $465.9 million as of December 28, 2024, compared to $489.1 million as of December 30, 2023, reflecting a decrease of approximately 4.7%[62] - The Company’s total marketing-related intangible assets, net, were $231.4 million as of December 28, 2024, down from $223.1 million as of December 30, 2023[62] - The Company’s customer-related intangible assets, net, were valued at $221.4 million as of December 28, 2024, compared to $251.8 million as of December 30, 2023, indicating a decrease of approximately 12%[62] - The Company amortizes its acquired intangible assets over a weighted average remaining life of 7 years for customer-related intangibles and 25 years for other acquired intangibles[64] - The estimated annual amortization expense related to acquired intangible assets is projected to be approximately $25 million per year from fiscal 2025 through fiscal 2027[65] Legal and Compliance - The Company has not experienced any product recalls that would materially affect its financial position or operations[98] - Management believes that ongoing legal proceedings will not have a material impact on the Company's consolidated financial statements[97] - The Company is currently not involved in any legal proceedings that could materially affect its operations, except for ongoing litigation related to patent infringement[96] - The Company intends to pursue its defenses in ongoing litigation and believes it will prevail on the merits regarding the damages issue[97] - There have been no changes in internal control over financial reporting that materially affected, or are likely to materially affect, the Company's internal control during the first quarter of 2025[155] - The Company’s disclosure controls and procedures were deemed effective as of December 28, 2024[154] - There has been no material change in the Company's exposure to market risk from the previous disclosures[154] Credit Facility - The Credit Facility includes a $50 million sublimit for standby letters of credit and a $75 million sublimit for swing loan borrowings, with no borrowings outstanding as of December 28, 2024[81] - The company maintained compliance with all financial covenants under the Credit Facility as of December 28, 2024[83] - The applicable margin for SOFR-based borrowings was 1.00% as of December 28, 2024, with interest rates based on SOFR and the Base Rate[81]

Group 1 - Central Garden (CENTA) reported quarterly earnings of $0.21 per share, exceeding the Zacks Consensus Estimate of a loss of $0.03 per share, marking an earnings surprise of 800% [1] - The company achieved revenues of $656.44 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.15% and showing an increase from $634.53 million year-over-year [2] - Central Garden has outperformed consensus EPS estimates in all four of the last quarters and has topped revenue estimates twice in the same period [2] Group 2 - The stock has underperformed the market, losing about 5.1% since the beginning of the year compared to the S&P 500's gain of 2.7% [3] - The current consensus EPS estimate for the upcoming quarter is $1.01 on revenues of $904.71 million, and for the current fiscal year, it is $2.22 on revenues of $3.23 billion [7] - The Zacks Industry Rank indicates that the Consumer Products - Discretionary sector is currently in the bottom 40% of over 250 Zacks industries, which may impact stock performance [8]