Pet ownership has increased multifold in recent years owing to rising disposable income and rapid urbanization. In fact, the Global Pet Care Market, which was valued at more than $232.3 billion in 2020, is projected to grow at a CAGR of 6.1% in the years 2021 – 2027. The COVID-19 pandemic-driven change in lifestyle has also been a key driver of the recent growth in the pet care market.
The volume of pet adoption has been rising since the onset of the pandemic as many more people found themselves with sufficient time spent at home to make pet ownership a viable option for them for them first time. Another notable growth driver in the pet care industry is the rise of e-commerce. Easy accessibility and options to choose from a wider assortment good and services as well as subscription delivery programs are attracting more customers. In 2020, the e-commerce channel accounted for 17% of revenues generated by pet care companies.
In addition, changing perceptions about pets and a growing norm of treating them as part of the family are also driving significant growth in the ownership of pets, dogs in particular. We believe that the rising demand for professional pet grooming services will drive the performance of pet care companies Zoetis Inc. (ZTS), Colgate-Palmolive Company (CL), Spectrum Brands Holdings, Inc. (SPB) and Central Garden & Pet Company (CENTA) in the coming months.
Zoetis Inc. (ZTS)
ZTS is a leading animal health company that is engaged in discovering, developing, and commercializing medicines, vaccines and diagnostic products, which are complemented by bio devices, genetic tests and precision livestock farming. The company serves veterinarians, livestock producers and people who raise farm and companion animals.
During the fourth quarter, ZTS launched the Vetscan Imagyst, a diagnostic platform that can help detect intestinal parasites in pets. The company also received regulatory approval for various products in different parts of the world. These include Simparica, Cytopoint and Revolution Plus tablets and two well-known swine vaccines – Fostera Gold PCV MH and Fostera Gold PCV.
This week, the European Commission granted ZTS marketing authorization for Solensia (frunevetmab), a new feline osteoarthritis treatment to alleviate pain.
ZTS’ revenue has increased 7.9% year-over-year to $1.81 billion in the fourth quarter ended December 31, 2020. Its non-GAAP gross profit has risen 6.6% from its year-ago value to $1.22 billion over the same period.
Analysts expect ZTS’ revenues to grow 12.1% year-over-year to $1.72 billion in the current quarter (ending March 31, 2021). A consensus EPS estimate of $1.02 for the first quarter represents a 7.4% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 14.9% over the past year.
ZTS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ZTS has a B grade for Quality, Momentum, Sentiment, and Stability. Of the 238 stocks in the Medical – Pharmaceuticals Industry, the stock is ranked #6.
In total, we rate ZTS on eight different levels. Beyond what we stated above, we also have given ZTS grades for Value and Growth. Get all of ZTS’ ratings here.
Colgate-Palmolive Company (CL)
Based in New York, CL is a leading consumer products company. Focused on Oral Care, Personal Care, Home Care and Pet Nutrition, the Company sells its products in more than 200 countries and territories under brands such as Colgate, Palmolive, Elmex, Hello, Meridol, Sorriso, Hill’s Science Diet, Hill’s Prescription Diet and others.
Last November, CL earned recognition on the 2020 Dow Jones Sustainability Indices (DJSI) for the fourth consecutive year for setting up actionable targets in reducing plastic waste, conserving water and improving oral health. The company was also named the top performing Household Products Company by the DJSI for the second year in a row and achieved “Industry Best” scores in the Environmental and Social categories. This demonstrates CL’s continued commitment to building environmental and social consciousness.
CL’s net sales have increased 7.7% year-over-year to $4.32 billion in the fourth quarter ended December 31, 2020. Its non-GAAP gross profit grew 9.4% year-over-year to $2.64 billion, yielding a gross profit margin of 61.1%, up 90 basis points over the same period. The company’s operating profit has risen 4.1% from its year-ago value to $969 million, while its adjusted EPS has improved 5.5% from the same period last year to $0.77.
Analysts expect CL’s revenues to grow 4.3% year-over-year to $4.27 billion in the current quarter (ending March 31, 2021). A consensus EPS estimate of $0.79 for the first quarter represents a 5.3% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 3% over the past year.
CL POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our ratings system. CL has an A grade for Stability and Quality. The stock is ranked #7 of 40 stocks in the B-rated Consumer Goods Industry.
Click here to see the additional POWR Ratings for CL (Value, Momentum, Growth, and Sentiment).
Spectrum Brands Holdings, Inc. (SPB)
SPB is a leading supplier of consumer products through its broad portfolio of market-leading and well-known brands. The Company operates through four vertically integrated product-focused segments: Hardware & Home Improvement (HHI), Home & Personal Care (HPC), Global Pet Supplies (PET) and Home & Garden (H&G). The company sells its products through retailers, e-commerce and online retailers, wholesalers and distributors, construction companies, and original equipment manufacturers.
SPB’s net sales have increased 31.4% year-over-year to $1.15 billion in the fiscal first quarter, ended January 3, 2021. Its adjusted EBITDA grew 99.7% year-over-year to $204.10 million, yielding an adjusted EBITDA margin of 17.8%, up 610 basis points over the same period. The company’s adjusted EPS from continuing operations improved 965% from the year-ago value to $0.20 over the same period.
Analysts expect SPB’s revenues to grow 9.7% year-over-year to $1.03 billion in the current quarter (ending March 31, 2021). A consensus EPS estimate of $1 for the second quarter represents a 9.9% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 35.2% over the past year.
It’s no surprise that SPB has an overall rating of B, which translates to Buy in our POWR Ratings system. SPB has a B grade for Value and Sentiment an A grade for Growth. Within the 64 stocks of the A-rated Home Improvement & Goods Industry, it is ranked #12.
Click here to see the additional POWR Ratings for SPB (Stability, Quality and Momentum).
Central Garden & Pet Company (CENTA)
CENTA is a marketer and producer of branded products and distributor of third-party products for the lawn and garden and pet supplies markets in the United States. It operates through two segments: Pet and Garden. The company is home to a leading portfolio of more than 65 high-quality brands, including Pennington, Nylabone, Kaytee, Amdro and Aqueon, with strong manufacturing and distribution capabilities.
This month CENTA completed the acquisition of Green Garden Products, valued at $532 million. This acquisition adds an important adjacent category in the CENTA’s garden segment, thereby enhancing the segment’s scalability.
In December, CENTA closed the acquisition of DoMyOwn, a leading and fast-growing online retailer of professional-grade control products, strengthening the Company’s position in the control product category. This transaction not only builds scale in the professional-grade control product category, but also adds eCommerce and Digital Capabilities to CENTA.
CENTA’s net sales have increased 22.7% year-over-year to $592.23 million in the fiscal first quarter, ended December 26, 2020. Its operating income grew 1209.4% year-over-year to $27.04 million, yielding an operating margin of 4.6%, up 420 basis points over the same period. Its EBITDA has increased 162.8% from the year-ago value to $40.0 million, while its EPS improved 110% to $0.10 over the same period.
Analysts expect CENTA’s revenues to grow 25.8% year-over-year to $884.60 million in the current quarter (ending March 31, 2021). A consensus EPS estimate of $1.01 for the second quarter represents a 29.5% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 52.1% over the past year.
CENTA has an overall rating of B, which translates to Buy in our ratings system. CENTA has a B grade for Value, Momentum, and Sentiment. It is currently ranked #12 of 43 stocks in the Home Improvement & Goods Industry.
Get all CENTA’s ratings here (Value, Growth and Stability).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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ZTS shares were trading at $156.57 per share on Thursday afternoon, down $2.48 (-1.56%). Year-to-date, ZTS has declined -5.25%, versus a 2.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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