Shares of Central Garden & Pet Co. jumped Wednesday, after an analyst upgraded the lawn products retailer's stock on the expectation for stronger margins and continued demand.
The stock advanced 81 cents, or 12.4 percent, to $7.36.
Piper Jaffray analyst Mitchell A. Kaiser upgraded the stock to "Buy" from "Neutral" and said operating margins are recovering, sales are stabilizing, and the company's garden division is poised for stronger sales.
Kaiser said Central Garden Chief Executive Bill Brown has stabilized operating margins by raising prices in bird seed products. The company has also lowered expenses and cut jobs in its underperforming aquatics division, Kaiser added.
The analyst also said Lowe's Cos. and Home Depot Inc. have reported strong sales of lawn and garden products.
"Lowe's cited strong demand for grass seed products as last year's drought in the Southeast is driving lawn repair projects," Kaiser wrote in a client note.
The analyst also said Home Depot reported higher grass seed sales in the first quarter.
Kaiser also hiked his price target by $5 to $10, implying upside of 52.7 percent to Tuesday's closing price of $6.55.
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