(PETM) PetSmart Earnings Preview

PetSmart Inc. (PETM), a specialty retailer of products, services and solutions for pets, is expected to reveal its financial results for the second-quarter of fiscal 2012 on Wednesday, August 15, 2012.

The current Zacks Consensus Estimate for the quarter stands at 65 cents per share, indicating an estimated year-over-year increase of 20.4%. The estimate lies between a low of 63 cents to a high of 67 cents. The Zacks Consensus Revenue Estimate is pegged at $1,600 million for the second quarter.

Recap of the First Quarter

PetSmart posted strong first-quarter 2012 earnings of 85 cents per share, reflecting a 39% rise from 61 cents delivered in the year-ago quarter. Moreover, the reported earnings handily surpassed the Zacks Consensus Estimate of 73 cents.

PetSmart’s top line increased 9.4% year over year to $1,629.9 million, ahead of the Zacks Consensus Estimate of $1,599 million. However, unfavorable foreign currency fluctuations negatively impacted the sales by $2 million. Comparable-store sales increased 7.4% in the quarter, driven by 3.3% growth in comparable transactions.

Guidance

For the second quarter of 2012, the company expects comparable store sales to increase in the mid-single-digits range, while earnings per share are expected to be in the range of 61 – 65 cents.

Based on the impressive first quarter results, the company raised its fiscal year guidance. Currently, PetSmart expects earnings in the range of $3.19 – $3.31 per share, while comparable-store sales are projected to increase in the mid-single-digit range, with total sales growth of 9% – 10%.  Gross margin is expected to expand by 65 to 75 basis points.

Agreement of Estimate Revision

Due to lack of any positive or negative news affecting the estimates directly or indirectly, all of the 22 analysts covering the stock remained stagnant regarding their estimates for the to-be-reported quarter as well as for the fiscal year 2012, over the last 7 or 30 days period.

Magnitude of estimate Revision

Since the analysts did not change their estimates, the estimate for the second-quarter 2012 remained fixed at 65 cents over the last 7 or 30 days.

Positive Earnings Surprise History

With respect to earnings surprise, PetSmart has outperformed the Zacks Consensus Estimate over the last four quarters, with an average of 6.9%. Based on the company’s previous performances, we expect PetSmart to continue with this momentum in the coming quarters.

Conclusion

The company’s innovative and differentiated products as well as its sustained effort to expand its portfolio of brands and assortments enabled it to deliver healthy results. PetSmart has collaborated with Martha Stewart Living Omnimedia Inc. (MSO) to launch different lines of pet products.

Based on higher sales and cost containment efforts in the first quarter of 2012, the company carries a Zacks #2 Rank, which translates into short-term Buy rating. We are also maintaining our long-term ‘Outperform’ recommendation on its stock.

Read the full analyst report on “PETM”
Read the full analyst report on “MSO”
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