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Pet Stocks Rise on Strong Sales of Pet Food


Pet Stocks Rise on Strong Sales of Pet Food

By Gabrielle Jonas
Pet Stocks Rise on Strong Sales of Pet Food: From a major pet supply chain to the pet division of a major food company, pet stocks rose last week. PetSmart closed up after an analyst upgraded its stock, while Del Monte Foods Co. continued to ride high thanks to its pet food division.

NEW YORK -- PetSmart Inc. (NASDAQ: PETM) closed up 1.8 percent Friday at $22.68 a share after a Janney Montgomery analyst raised his rating on the PetSmart stock from "neutral" to "buy" Thursday. The pet retailer also declared a quarterly common stock cash dividend of 10 cents per share, payable next month.

The stock price is now near 52-week highs. PetSmart has not only been profitable but beaten analyst expectations for four quarters straight. The company is expected to earn 22 cents in its third quarter.

Currently, the company is trading at about 15 1/2 times this year's estimate, or $1.42, and is expected to grow its earnings per share at a healthy rate in the next three to five years, analysts said. The company is also expected to grow nearly 12.6 percent a year in the next five years.

Analysts credit an improving national economy for its growth, although consumers are still shy about leaving their discount retailers such as Walmart for the more expensive PetSmart.

Matt Cavallaro, an equity analyst at BetterTrades.com, a stock market education company, recommended in August that stock bargain-hunters take a good look at PetSmart, despite an earlier downgrade.

"The stock gets knocked after a downgrade, and, at these prices, it's worth a shot to jump in," he wrote at the time.

"Despite the recession clawing away at retailers' profits, the nation's largest retail pet store chain, PetSmart, still managed to ring up $5.1 billion in sales last year," Cavallaro wrote. "Consumers may be pulling back on aggregate spending, but not when it comes to their furry friends."

Late last summer, PetSmart reported a 4.8 percent increase in net income during the second quarter, guided higher by a 5.1 percent revenue increase to $1.3 billion. Sales fell just shy of analysts' estimates, but profits of $39 million beat expectations for the quarter.

PetSmart continued to make modest gains Monday, climbing up more than 1/2 a point to 22.8 cents a share.

PetSmart Inc. is a specialty pet retailer of supplies and services for pets. The company operates more than 1,145 pet stores in the United States and Canada, as well as 156 in-store cat and dog boarding facilities.

Del Monte Up on Pet Food Sales

Del Monte Foods Company (NYSE: DLM) continued to ride high last week on strong performance of its pet food division, with stocks closing Friday at $11.55 per share.

Second quarter consensus estimates rose 3 cents to 20 cents in the previous 30 days, with two out of nine analysts raising their estimates in the last two weeks.

Stock prices for the full year have moved two cents higher than the current guidance range, climbing 17.5 percent in the last 30 days to 94 cents from 80 cents. All six covering analysts raised estimates in that time period.

Del Monte Foods is ranked a "strong buy" stock by analysts.

Last month, Del Monte issued first-quarter earnings revealing sales jumped more than 20 percent to $412.3 million from $342.7 million in the year-before quarter. At the time, the company forecast fiscal first quarter for the following year, 2010, that blew analysts' estimates by a whopping 900 percent.

Del Monte Foods distributes food such as Del Monte and Contadina and pet products such as Meow Mix, Kibbles 'n Bits, 9Lives and Milk-Bone in the United States and South America. The company is not affiliated with Fresh Del Monte, the fruit and vegetable provider.

Earnings per share were a record for the first quarter of 30 cents compared to the estimates of 3 cents and easily surpassed earnings per share of a year ago, when it was a loss of 4 cents. Sales jumped 12 percent to $813.7 million from $726.2 million.

Given the record first quarter, Del Monte boosted full year guidance to 88 to 92 cents, up from the prior target of 76 to 80 cents, well above fiscal 2009's earnings per share of 74 cents.

In Monday morning trading last week, Del Monte slipped a quarter of a percent to $11.40.

PetSmart will be reporting its third-quarter earnings in a Web cast on Thursday, Oct. 15, beginning at 11 a.m. Eastern Daylight Time at the PetSmart Investor Relations Web site, www.petm.com. A replay will also be available on the site shortly following the event.

Gabrielle Jonas is a Zootoo Pet News staff reporter and can be reached at gjonas@zootoo.com.

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