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3 Small-Cap Stocks on the Way to Bigger and Better DaysCentral Garden & Pet NASDAQ: CENT executives said the company is entering a period of record profitability, expanding margins and increased acquisition activity as it simplifies its operating structure and pursues growth in pet and garden products.

Speaking at Canaccord’s 46th Annual Growth Conference, Chief Executive Officer Niko Lahanas said the company’s year-to-date results included record earnings, EBIT, EPS, cash flow and cash balances. He said the Garden segment posted a record quarter and that the company’s fiscal third-quarter EPS was its second-highest ever, despite what he described as a difficult comparison period.

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MarketBeat ‘Stock of the Week’: Central Garden & Pet Lahanas also pointed to Central Garden & Pet’s pending acquisition of an 80% interest in European pet-supplies company TRIXIE, which he said is expected to close in January or February of next year. The transaction represents a major international expansion for the company, bringing foreign-exchange exposure as well as a presence in Europe.

TRIXIE Deal Expands European Pet Presence Lahanas described TRIXIE as Europe’s largest pet-supplies business and said combining it with Central’s operations would create what he called the largest global pet-supplies business. He said the transaction offers a platform for further European consolidation, citing a fragmented market and lower acquisition multiples than those seen in the U.S.

Growth Ahead for Central Garden & PetThe CEO said TRIXIE also increases Central’s exposure to cat products, an area where the company’s existing presence is limited. About 20% to 25% of TRIXIE’s business is related to cats, according to Lahanas. He said Central sees continued opportunity in cat products, citing cats’ lower-maintenance nature for consumers.

Central ended its fiscal third quarter with nearly $1 billion in cash and has not tapped its asset-based lending facility, giving it nearly $2 billion of available capital, Lahanas said. He estimated the TRIXIE transaction could total more than $400 million, assuming earn-out payments are achieved.

“Deals beget deals,” Lahanas said, adding that Central has received more inbound acquisition interest following the TRIXIE announcement. He said the company has completed more than 60 acquisitions over its 40-year history and considers M&A a core part of its strategy, particularly in mature categories where acquisitions can alter competitive positioning more quickly than organic growth alone.

Simplification Efforts Support Margins Management attributed improving profitability in part to cost reductions, logistics consolidation and portfolio optimization. Lahanas said the company has focused on exiting or restructuring businesses where it lacks a “right to win” or where channel dynamics have changed structurally.

Central recently announced the divestiture of its pet distribution business through a joint venture in which it will retain a 20% stake. Lahanas said the distribution operation had a large customer base, a SKU count approaching 40,000, fuel exposure, trucking costs and workers’ compensation costs, while generating relatively low margins.

The joint venture structure will preserve Central’s access to independent pet retailers and the product innovation taking place in that channel, while keeping the business out of its consolidated financial results, he said. Lahanas added that independent pet retailers face pressure from food, drug and mass retailers, e-commerce, convenience and subscription models.

He said Central has structurally improved its profitability, noting that the pet business has a gross margin “with a four in front of it” and EBITDA margins of approximately 19% on the pet side. The Garden business can generate similar margins during its season, he said.

Garden Portfolio Helps Offset Weather Volatility Jason Barnes, executive vice president of Garden Consumer Products, said Central’s garden portfolio differs from competitors because of its breadth. In addition to categories shared with companies such as The Scotts Miracle-Gro Company and Spectrum Brands, Central operates in wild bird, live goods and packet seeds.

That diversification can help moderate weather-related volatility, Barnes said. Wild bird products, for example, can perform better in colder conditions than traditional spring garden categories.

Weather remained a major factor during the most recent garden season. Barnes said a strong March and early April gave way to a difficult May, as the market shifted from cold and wet weather to a heat dome without a typical spring period. He said the company’s ability to manage costs and its profit-and-loss structure helped it navigate the volatility and still deliver a record Garden quarter.

Executives also highlighted continued strength in wild bird products. Lahanas said the category gained younger consumers during the pandemic and has remained resilient. Central introduced its Feeding Frenzy product line at Walmart roughly a year ago, supported by new packaging and digital marketing.

E-Commerce, Data and Value Remain Priorities E-commerce accounts for about 26% of Pet sales and about 10% of Garden sales, Lahanas said. Barnes said Central expects Garden e-commerce penetration to expand by another 200 basis points this year, supported by its direct-to-consumer pest-control capabilities and growth across both pure-play and omnichannel retail.

Beyond acquisitions and share repurchases, Central plans to invest in its data infrastructure, artificial intelligence capabilities, logistics network and robotics. Lahanas said the company’s acquisition history has left data insufficiently integrated, and management sees improved data organization as necessary to use AI tools effectively.

On consumer demand, Lahanas said shoppers remain focused on value, particularly at the lower end of the income spectrum. He cited the company’s Bully Hide pet product and The Rebels value-tier grass seed brand as examples of products designed to provide lower-priced options while maintaining quality.

About Central Garden & Pet (NASDAQ:CENT)Central Garden & Pet NASDAQ: CENT is a leading North American specialty retailer, manufacturer and distributor serving the lawn and garden and pet supplies markets. The company operates through two primary segments: Pet and Garden. In the Pet segment, Central Garden & Pet offers a comprehensive range of products including pet food, treats, accessories, training products and habitat solutions for dogs, cats, birds, fish and small animals. The Garden segment encompasses a wide array of lawn, garden and outdoor living products, such as soils, fertilizers, planters, pest control solutions, landscape lighting and watering equipment.

Central Garden & Pet's product portfolio includes both proprietary and branded offerings.

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Central Garden (CENT - Free Report) came out with quarterly earnings of $1.54 per share, beating the Zacks Consensus Estimate of $1.51 per share. This compares to earnings of $1.56 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of +1.99%. A quarter ago, it was expected that this maker of products for the pet supply and lawn and garden markets would post earnings of $1.08 per share when it actually produced earnings of $1.29, delivering a surprise of +19.44%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Central Garden, which belongs to the Zacks Consumer Products - Discretionary industry, posted revenues of $882.36 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 0.66%. This compares to year-ago revenues of $960.91 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Central Garden shares have added about 37.1% since the beginning of the year versus the S&P 500's gain of 13%.

What's Next for Central Garden?While Central Garden has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Central Garden was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.05 on $586.21 million in revenues for the coming quarter and $2.89 on $2.99 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Consumer Products - Discretionary is currently in the bottom 22% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the broader Zacks Consumer Discretionary sector, Savers Value Village (SVV - Free Report) , has yet to report results for the quarter ended June 2026. The results are expected to be released on August 6.

This retailer of second-hand merchandise is expected to post quarterly earnings of $0.14 per share in its upcoming report, which represents no change from the year-ago quarter. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Savers Value Village's revenues are expected to be $450.09 million, up 7.9% from the year-ago quarter.

Key Takeaways Central Garden's cost and simplicity program is strengthening efficiency and business resilience.CENT expanded gross and operating margins through sales leverage, cost management and simplification.CENT is optimizing manufacturing and distribution to improve flexibility and support profitable growth. Central Garden & Pet Company (CENT - Free Report) noted that its Cost and Simplicity program has fundamentally strengthened the business. The company believes that these efforts have improved operational efficiency, enhanced organizational resilience and created a better-run business. Management also emphasized that this focus on cost discipline and simplification is now embedded in the company’s operating model and continues to shape the way it manages and executes its business.

The company expanded second-quarter fiscal 2026 gross margin by 30 basis points to 33.1%, while operating margin improved to 12.6% from 11.2% in the prior-year period. Higher sales leverage, prudent cost management and ongoing organizational simplification supported margin expansion while allowing continued investment in key growth initiatives. Management highlighted multiple initiatives to simplify the business while enhancing execution and operational efficiency. As part of these efforts, the company relocated its DoMyOwn business to its Covington fulfillment center to improve delivery speed, reduce costs and increase network flexibility.

Additionally, in the last earnings call transcript the company noted that it is consolidating Top Dog Best Bully Sticks manufacturing into its dog and cat platform in New Jersey to leverage scale and manufacturing capabilities better. The company also entered into a joint venture with Phillips Pet Food & Supplies while retaining a 20% ownership stake. Management believes that the partnership will strengthen and enhance the agility of its nationwide distribution network, simplify operations and allow the company to focus more directly on expanding its Central branded portfolio.

The company believes that the streamlined structure supports better execution, stronger productivity and improved cost control while creating room to continue investing behind brands and innovation. Management also reaffirmed fiscal 2026 earnings guidance, noting that ongoing margin discipline and portfolio optimization remain central to its operating strategy despite inflation, tariffs and a promotional retail environment. Management expects adjusted earnings to be $2.70 per share or better.

The Zacks Rundown for CENTShares of this Zacks Rank #3 (Hold) company have soared 29.6% in the past six months compared with the industry’s growth of 12.4%.

Image Source: Zacks Investment Research

From a valuation standpoint, CENT trades at a forward price-to-earnings ratio of 14.04, lower than the industry’s average of 14.76.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for CENT’s current and next fiscal year earnings implies year-over-year growth of 5.9% and 7.3%, respectively.

Image Source: Zacks Investment Research

Stocks to ConsiderSome better-ranked stocks have been discussed below:

ARKO Corp. (ARKO - Free Report) operates a chain of convenience stores in the United States. ARKO currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ARKO's current fiscal-year sales implies a decline of 2.8%, while the same for current fiscal-year earnings implies growth of 93.3% from the year-ago reported figures. ARKO delivered a trailing four-quarter earnings surprise of 43.2%, on average.

Colruyt Group N.V. (CUYTY - Free Report) together with its subsidiaries, engages in the retail, wholesale, food service, and other activities in Belgium, France, and internationally. It presently flaunts a Zacks Rank #1.

The Zacks Consensus Estimate for CUYTY's current financial-year sales and earnings indicates 7.4% and 2.5% growth, respectively, from the last year.

Phibro Animal Health Corporation (PAHC - Free Report) operates as an animal health and mineral nutrition company in the United States, Latin America and Canada, Europe, the Middle East, Africa, and the Asia Pacific. PAHC currently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for PAHC's current fiscal-year sales and earnings implies growth of 14.8% and 47.4%, respectively, from the year-ago actuals. PAHC delivered a trailing four-quarter earnings surprise of 16.3%, on average.