PetSmart (PETM) Plunges on Bleak Guidance for 2013
Shares of PetSmart (PETM: Analysis) plunged after hours on Wednesday, after the company reported robust fourth quarter earnings that were soured by downbeat guidance which missed analyst estimates. Daily Chart
The company, which owns 1,300 pet stores in the United States and Puerto Rico, reported fourth quarter earnings of $1.24 per share, or $134 million, up 31% from the 91 cents per share, or $102 million, it reported in the prior year quarter, and topped the analyst consensus of $1.21 per share.
Revenue also rose 15% to $1.88 billion, but missed Wall Street's estimate of $1.89 billion by a hair. PetSmart's fourth quarter marks its 12th consecutive quarter of reporting double-digit earnings growth. The company attributed its robust numbers to high-margin prescriptions, premium pet foods and hard goods. Although PetSmart's fourth quarter seemed healthy, the company now expects to earn between $3.76 to $3.92 per share for fiscal 2013. That comes short of Wall Street's consensus of $3.93 per share. PetSmart also now expects revenue to grow between 2% to 4% for the year, missing the consensus expectation of 5% top line growth. PetSmart traditionally gives more upbeat guidance in the fourth quarter, which may explain the sudden surge of bearish sentiment. In the previous year's fourth quarter, PetSmart offered a full year 2012 projection of $3.02 to $3.16 per share, well ahead of the consensus estimate of $3.01. Prior to that, PetSmart offered in-line guidance for fiscal 2011, matching the analyst consensus estimate of $2.32 with a projected range between $2.23 to $2.35 per share. For the first quarter of the year, however, the company's outlook remains healthy, expecting to earn 92 to 98 cents per share, in line with the consensus estimate of 94 cents per share. Analysts are blaming the company's comparatively high trailing P/E multiple of 20 for its downfall. While the company only barely missed its top line forecast, and its full-year guidance only came up a penny short, shares crashed over 7% in early trading on Thursday. Pent up expectations were a bit high, and the company also cast doubt on its ability to grow its top and bottom lines to justify its multiple in 2013. PetSmart's same-store sales came in at 4.6% for the quarter, missing its own prior forecast. Looking ahead, the company expects same-store sales to rise by 2% to 4% in 2013. The company's CFO Chip Molloy also told analysts that store traffic came in lower than expected, signifying potentially slower growth ahead. In 2013 PetSmart will also have to adjust to a new CEO, David Lenhardt, who was named to replace Bob Moran in January as part of a planned management succession. Lenhardt will effectively become CEO after its annual shareholders meeting this June. After its precipitous plunge, shares of PetSmart currently trade at 14.85 times forward earnings with a 5-year PEG ratio of 0.95. The stock was up 20% over the past twelve months prior to its post-earnings slide. It does not pay a dividend. Other News About PETM PetSmart Q4 Profit Up 31%, Issues Dim Yearly View
A weak outlook for 2013 crushes the stock. PetSmart's Earnings Beat
PetSmart's earnings look fundamentally sound, but shares slide. Other Stocks in the News Serving Up a Cup of Value: Starbucks Corporation
Is Starbucks boiling to the brim? Big Tobacco is Still Growing
Are Philip Morris and Altria still strong buys for the next decade? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.
Published on Mar 8, 2013
By Leo Sun