Pet company Central Garden & Pet (NASDAQ: CENT) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 3.6% year on year to $960.9 million. Its non-GAAP profit of $1.56 per share was 9.3% above analysts’ consensus estimates.
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Central Garden & Pet (CENT) Q2 CY2025 Highlights:
- Revenue: $960.9 million vs analyst estimates of $981.8 million (3.6% year-on-year decline, 2.1% miss)
- Adjusted EPS: $1.56 vs analyst estimates of $1.43 (9.3% beat)
- Adjusted EBITDA: $166.6 million vs analyst estimates of $153.7 million (17.3% margin, 8.4% beat)
- Management raised its full-year Adjusted EPS guidance to $2.60 at the midpoint, a 18.2% increase
- Operating Margin: 14.1%, up from 12.8% in the same quarter last year
- Free Cash Flow Margin: 26.2%, down from 27.3% in the same quarter last year
- Market Capitalization: $2.32 billion
Company Overview
Enhancing the lives of both pets and homeowners, Central Garden & Pet (NASDAQ: CENT) is a leading producer and distributor of essential products for pet care, lawn and garden maintenance, and pest control.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.
With $3.12 billion in revenue over the past 12 months, Central Garden & Pet carries some recognizable products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale.
As you can see below, Central Garden & Pet’s revenue declined by 2.5% per year over the last three years, a tough starting point for our analysis.
This quarter, Central Garden & Pet missed Wall Street’s estimates and reported a rather uninspiring 3.6% year-on-year revenue decline, generating $960.9 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 2.3% over the next 12 months. While this projection indicates its newer products will spur better top-line performance, it is still below average for the sector.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Central Garden & Pet has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 9.6% over the last two years, quite impressive for a consumer staples business.
Central Garden & Pet’s free cash flow clocked in at $251.7 million in Q2, equivalent to a 26.2% margin. The company’s cash profitability regressed as it was 1.2 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.
Key Takeaways from Central Garden & Pet’s Q2 Results
We were impressed by how significantly Central Garden & Pet blew past analysts’ EPS expectations this quarter. We were also happy its gross margin outperformed Wall Street’s estimates, and looking ahead, full-year EPS guidance was raised. On the other hand, its revenue missed. Overall, this print was mixed. The stock remained flat at $39.41 immediately after reporting.
Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
