PetSmart (PETM) has posted several positive earnings surprises and is now a Zacks #2 Rank (Buy).
Company Description
PetSmart operates as a specialty retailer of products and services for pets. The company offers pet food, treats, and litter. It also offers hard goods which include pet supplies and other goods comprising collars, leashes, health care supplies, grooming and beauty aids, toys, apparel, and pet beds. In addition, the company operates PetsHotels that offer boarding for dogs and cats; provides personalized pet care and an on-call veterinarian. As of January 29, 2012, it operated 1,232 retail stores; 192 PetsHotels; 791 veterinary hospitals under the trade name of Banfield, The Pet Hospital; and 8 hospitals operated through other third parties in Canada. The company also offers its products through an e-commerce and community site, PetSmart.com. PetSmart, Inc. was founded in 1986 and is based in Phoenix, Arizona.
PetSmart Tops Estimates for Five Straight Quarters
PetSmart has met or topped the Zacks Consensus Estimate in each of the last five quarters. The average beat has been $0.03 more than the Zacks Consensus Estimate which works out to be a 5.2% positive earnings surprise. As a result of the positive earnings surprises, the stock has moved higher by an average of 0.3% following the earnings releases.
The largest price movement in the stock came the day after the company reported the April 2011 quarter. PetSmart beat the topline estimate of $1.48 billion by posting revenues of $1.49 billion. EPS of $0.61 was $0.06 higher than the $0.55 Zacks Consensus Estimate and the stock moved higher by more than 7%.
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PetSmart Most Recent Reported Earnings
On February 29, 2012 PetSmart reported revenue of $1.638 billion, approximately $17 million higher than the Zacks Consensus Estimate and up from $1.520 billion reported in year ago quarter, an increase of of 8%. Earnings per share came in at $0.91, $0.01 higher than the Zacks Consensus Estimate of $0.90. The beat of 1.1% didn’t help the stock, as investors saw the stock virtually unchanged following the small positive surprise.
PetSmart Next Earnings Release
On May 22, 2012 PetSmart is expected to report revenue of $1.597 billion, approximately $77 million higher than the year ago quarter, an increase of of 7%. The Zacks Consensus Estimate for Earnings per share is calling for $0.73.
PetSmart Sees Estimates Moving Higher
PetSmart has seen earnings estimates move higher following the recent positive earnings surprise. The Zacks Consensus Estimate for 2012 was as low as $2.98 in December 2011 and has since bumped higher to $3.13.
Estimates for 2013 have also seen an increase following the most recent quarterly release. The Zacks Consensus Estimate for 2013 stood at $3.45 in December 2011 and has since moved to $3.49.
The valuation for PetSmart is mostly in line with the industry average. A 22x trailing twelve months PE multiple is just below the 23x industry average. The forward earnings multiple of 18.5X for PETM is just above the 17.9x industry average. Price to book shows the stock trading at a slight premium to the industry average and the price to sales multiple also shows the stock trading at a slight premium.
The Chart
A quick look at the price and consensus chart shows just what aggressive growth investors are looking for. Consistent growth in earnings and a stock that responds to those increases. The large gap in earnings lines for 2011 and 2012 has been replicated in the 2013 line, suggesting that analysts see more of the same for PetSmart. PetSmart is a Zacks #2 Rank (Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
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