American pet retailer Petco Health & Wellness Company, Inc. (WOOF) delivered outstanding second-quarter results driven by recurring revenue, a rapidly expanding vet business, and digital growth. Shares jumped 3.6% on the news to close at $19.99 on August 19.
The company reported adjusted earnings of $0.25 per share, up 127% year-over-year and meaningfully outpacing the Street’s estimate of $0.20 per share. (See Petco Health & Wellness stock charts on TipRanks)
Moreover, net revenue climbed 19% to $1.43 billion compared to the year-ago period and surpassed analysts’ estimates of $1.36 billion. Also, comparable sales grew 20% year-over-year, aided by continued momentum in the business.
Commenting on the company’s solid performance, Ron Coughlin, Chairman, and CEO of WOOF said, “Looking ahead, we’re operating from a position of strength as we move into the second half, which gave us the confidence to raise our guidance. We believe we have a significant runway for continued growth as we execute against our proven transformation strategy in multi-year growth areas across services, veterinary care, digital, and owned and premium brands.”
For the full year 2021, WOOF now projects net revenue and adjusted earnings to fall in the range of $5.6 – $5.7 billion and $0.81 – $0.85 per share, respectively. Consensus estimates for revenue and earnings are pegged at $5.58 billion and $0.76 per share, respectively.
Impressed with WOOF’s solid beat-and-raise results, Wells Fargo analyst Zachary Fadem maintained a Buy rating on the stock with a price target of $30, implying 50.1% upside potential to current levels.
Fadem noted that multi-channel initiatives coupled with sustaining comparable sales witnessed in the company’s Q2 results add further credibility to the WOOF story.
Furthermore, the analyst said, “We believe WOOF is increasingly well-positioned to capitalize on category tailwinds with a repositioned business model built to capture share in an attractive and highly fragmented category.”
Overall, in the coming years, Fadem foresees WOOF’s position strengthening, with strong secular growth, category defensiveness, and share opportunities via differentiation, digital, and vet/services.
The stock has a Moderate Buy consensus rating based on 5 Buys and 1 Sell. The average Petco Health & Wellness price target of $26.20 implies 31.1% upside potential to current levels. Shares have lost 13.7% over the past six months.
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