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What Makes Scotts Miracle-Gro an Attractive Investment Option

Zacks Equity Research

The Scotts Miracle-Gro Company SMG stock looks promising at the moment. The company’s shares have gained around 27% year to date.

We are positive regarding the company’s prospects and believe that the time is right to add the stock to your portfolio as it looks promising and is poised to carry the momentum ahead.

Let's see what makes the company an appropriate investment option at the moment.

An Outperformer

Scotts Miracle-Gro has significantly outperformed the industry it belongs to in the past year. The company’s shares have surged 50.1% against the 24.4% decline of the industry. The company has also outpaced the S&P 500’s growth of 4% over the same period.

Solid Q2 Results, Reaffirms View

Scotts Miracle-Gro’s adjusted earnings per share (EPS) for second-quarter fiscal 2020 were $4.50, up 23.6% year over year. The figure beat the Zacks Consensus Estimate of $4.07.

For fiscal 2020, the company has reaffirmed its sales growth outlook for the U.S. Consumer unit in the range of 1-3%. It now expects sales in the Hawthorne segment to rise 30-35% in fiscal 2020. Based on these assumptions, it projects company-wide sales growth between 6% and 8% for the full year. The company expects to achieve its adjusted EPS guidance of $4.95-$5.15.

Sunlight Supply Buyout to Boost Hawthorne

Scotts Miracle-Gro is benefiting from the synergies of the Sunlight Supply acquisition. The buyout provides the company with modern and cost-efficient supply chain in the hydroponic industry.

In the fiscal second quarter, net sales in the Hawthorne segment rallied 60% year over year. The upside can be attributed to strong demand in almost all categories.  The company anticipates Hawthorne’s sales to grow 30-35% in fiscal 2020.

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Estimates for fiscal 2020 for Scotts Miracle-Gro have moved up in the past month. Over this period, the Zacks Consensus Estimate for current-year earnings rose 1.8%. Also, the Zacks Consensus Estimate for earnings for fiscal 2020 is currently pegged at $5.26 per share, which suggests year-over-year growth of 17.7%.

The Scotts MiracleGro Company Price and Consensus

The Scotts MiracleGro Company Price and Consensus

The Scotts MiracleGro Company price-consensus-chart | The Scotts MiracleGro Company Quote

Zacks Rank & Other Key Picks

Scotts Miracle-Gro currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Royal Gold, Inc. RGLD and Newmont Corporation NEM. While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), Royal Gold and Newmont carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has an expected earnings growth rate of 75.3% for 2020. The company’s shares have surged 54.2% in the past year.

Royal Gold has an expected earnings growth rate of 67.6% for fiscal 2020. Its shares have returned 55.5% in the past year.    

Newmont has an expected earnings growth rate of 82.6% for 2020. The company’s shares have surged 87.9% in the past year.

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