PetSmart Q3 Results Beat Estimates, Raises FY12 EPS Outlook (PETM)

In anticipation of strong quarterly performance, the shares of specialty pet products retailer PetSmart (NASDAQ: PETM) opened with a positive gap yesterday but fell sharply on overall weakness in the market. After the trading session ended Wednesday, the company reported fiscal 2012 third-quarter results that beat estimates. PetSmart also issued fiscal 2012 fourth-quarter earnings per share guidance while raising the full-year 2012 earnings outlook.

The Arizona-based PetSmart offers pet food, health care supplies, grooming and beauty aids, toys and many other pet-related items. The company also carries fresh-water fish, small birds, reptiles and other small pets. PetSmart also operates PetsHotels that offer boarding for dogs and cats.

The net sales for the fiscal 2012 third quarter increased to $1.63 billion from $1.50 billion in the corresponding period last year. The revenue estimate of analysts was $1.62 billion for the third quarter of fiscal 2012.

The net income for the third quarter increased 50% to $82.32 million, or $0.75 per share, from $56.16 million, or $0.50 per share, in the comparable quarter of fiscal 2011. The earnings estimate of analysts was $0.63 per share for the third quarter of 2012.

Commenting on the results, Bob Moran, Chairman and CEO, said, “Our performance in the third quarter was due to strength across all three merchandising categories, as well as across services. We are executing well, and continue to define the pet specialty customer experience.”

After trading at around $45.00 for most of 2011, a buy rating from Zacks Equity Research provided the necessary thrust for the share price of PetSmart to move up to $52.33 in December 2011. As PetSmart made inroads into competitors’ market share, the stock appreciated to around $55.00 in the third week of January. A 27% growth in fiscal 2011 earnings reported in late February initiated another round of buying that took the share price to around $59.00 in the last week of March. The fiscal 2012 first-quarter results that beat estimates propelled the share price by $9.00 to $64.51 on May 29. The momentum continued both on the performance front and stock charts in the fiscal 2012 second quarter. By the second week of September, the share price attained a new 52-week high of $72.75. The share price declined to around $66.00 in the second half of October after PetSmart went ex-dividend.

Yesterday, the share price opened 72 cents higher than Tuesday’s close of $65.71. However, the overall negative sentiment pushed the share price to around $65.50. After trading most of the day at that level, the share price slid in the last two hours of the trading session.

For the fiscal 2012 fourth quarter, PetSmart expects comparable store sales growth in the mid-single-digit range. The company also anticipates earnings per share between $1.16 and $1.20. The earnings estimate of analysts is $1.20 per share for the fourth quarter of fiscal 2012.

For the entire fiscal year 2012, PetSmart expects comparable store sales growth in the range of 6% to 7% and total sales growth between 10% and 11%. The company also raised the fiscal 2012 earnings per share guidance to the range of $3.47 to $3.51. The previous expectation was between $3.30 and $3.40 per share. The earnings estimate of analysts is $3.39 per share for the full year 2012.

PetSmart ended yesterday’s trading session at $64.85, down $0.86 or 1.3% on a volume of 1.48 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.