Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Central Garden & Pet Stock Plummeted 19%

By Rich Smith - Nov 27, 2019 at 1:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Earnings plunge more than expected, missing estimates badly.

What happened

Central Garden & Pet Company ( CENT 1.22% ) ( CENTA 1.40% ) stock took a tumble on Wednesday, and is down 19.2% as of 12:40 p.m. EST, after the maker of branded and private-label lawn and garden and pet supplies reported a big earnings miss in its fiscal Q4 2019 earnings report, released last night.

Glowing red arrow trending down

Image source: Getty Images.

So what

Central Garden & Pet earned just $0.04 per diluted share in fiscal Q4, down from $0.19 per share a year ago -- a 79% drop. Analysts had expected Central Garden's earnings would decline; consensus estimates called for the company to earn $0.17 per share. The much steeper-than-expected decline in profit, however, appeared to take investors by surprise -- especially given that sales in the quarter actually grew by a respectable 8%.  

A sharp rise in input costs appears to be primarily to blame for the decline. Cost of goods sold spiked more than 10% in the quarter, outpacing sales gains.

Now what

And don't expect things to get much better very soon, because Central Garden & Pet expects "continuing challenges in the animal health businesses" and "higher corporate expenses" to weigh on its results in the year ahead.

Issuing new guidance for fiscal 2020, management warned that "diluted EPS for fiscal 2020 will be at or modestly above its fiscal 2019 results." And in Q1 in particular, the company expects to lose between $0.10 and $0.15 per share. For any investors hoping for a return to growth in 2020, this news has to come as a disappointment -- and they're making their displeasure known by selling Central Garden & Pet stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Central Garden & Pet Company Stock Quote
Central Garden & Pet Company
$45.03 (1.40%) $0.62
Central Garden & Pet Company Stock Quote
Central Garden & Pet Company
$49.69 (1.22%) $0.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.