KeyBanc Upgrades Underappreciated Central Garden And Pet Co.

Central Garden & Pet Co CENT, which distributes products for the lawn and garden and pet supplies market, has an attractive risk/reward profile at current levels, according to an analyst at KeyBanc Capital Markets.

The Analyst

KeyBanc analyst Jason Gere on Monday upgraded Central Garden & Pet Co. from Sector Weight to Overweight and assigned a price target of $44.

The analyst attributed the upgrade to a lack of stock price appreciation since a solid 2017 fourth quarter results posed in November.

The Thesis

Central Garden & Pet Co. is well-positioned to grow top- and bottom-lines above the household and personal care, or HPC group, average in fiscal year 2018 and beyond, Gere said in a note.

Gere listed the following as what he likes about the company:

• Healthy categories and market share gains;
• Margin opportunities that could potentially provide long-term earnings power;
• Benefit of tax reform to 2018 earnings per share;
• Management's aggressive M&A strategy and new JVs; and
• Successful track record of the management.

Gere said the company's earnings could experience quarterly volatility due to factors such as JV and the lack of extra week in 2018. The analyst said this has already been digested by the Street.

The analyst mentioned understanding of commitment to PL lawn and garden strategy, which Central Garden & Pet Co. makes post year one as another pushback.

The Price Action

Central Garden & Pet Co. shares are up over 23 percent over the past year.

At time of writing, shares were up 6.7 percent to $40.36.

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