Why Central Garden Shares Got Sheared

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of pet, lawn, and garden supply company Central Garden & Pet (NASDAQ: CENT) plunged 11% today after its quarterly results disappointed Wall Street

So what: Second-quarter revenue growth of 7% managed to top expectations, but a wide miss on the bottom line -- EPS of $0.46 versus the consensus of $0.53 -- is forcing analysts to lower their valuation estimates, yet again. In fact, gross and operating margins for the quarter shrank 90 basis points and 30 basis points, respectively, over the year-ago period, reinforcing recent concerns over weak discretionary spending and intensifying competition.

Now what: Central Garden said that its third-quarter results will likely be lower than the prior year due to some deferred orders included in the third quarter of 2012. "As we move forward, we will be more customer-focused on delivering premier levels of service, innovation and quality, while still reducing costs," CEO John Ranelli reassured investors. "This balanced approach should enable us to drive increased revenue and profits for our shareholders in the future." More important, with the stock hitting a new 52-week low today, and trading at a forward P/E of eight, betting on that turnaround talk might not be a bad idea.   

Interested in more info Central Garden? Add it to your watchlist.

The article Why Central Garden Shares Got Sheared originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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