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Raymond James Raises PT On Scotts Miracle-Gro Following Q1 Earnings

Alex Oleinic

Analysts at Raymond James reiterated their rating on Scotts Miracle-Gro Co (NASDAQ: SMG), even though the company's fiscal first quarter results were "somewhat" below their expectations. Nevertheless, the analysts saw a number of "encouraging" signs in the earnings report.

The Analyst

 Joseph Altobello reiterated his Outperform rating on the Scotts Miracle-Gro and raised the price target from $71 to $80. 

The Thesis

Scotts Miracle-Gro posted an adjusted net loss of $1.39 per share, which was 29 percent lower than Raymond James' estimate of $1.15 and below the consensus of $1.25. Altobello pointed out that the miss was mostly due to temporary Cost of Goods Sold and non-operating items such as a lower tax rate and diluted share count.

The company's earnings of $298.1 million grew by 35 percent on the year, slightly lower than the 38 percent the analyst had expected.

Altobello also pointed out that Scotts Miracle-Gro's U.S. consumer segment enjoyed a 9-percent sales growth during the quarter, which was above their estimates of a 1-percent growth.

The cannabis-focused Hawthorne subsidiary grew its sales by 84 percent, versus Raymond James' expectations of 108 percent. Hawthorne sales were boosted by the acquisition of Sunlight Supply, but on a comparable basis the sales fell by less than 10 percent on the year, which is an improvement from the previous quarters' drops of 30-40 percent. 

In this way, Altobello said, Scotts Miracle-Gro is showing solid trends for its U.S. consumer segment and the integration of Sunlight is well on track to provide synergies of around $0.60 per share.

Price Action

Scotts Miracle-Gro's stock closed Friday $74.18. 

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Latest Ratings for SMG

Date Firm Action From To
Jan 2019 JP Morgan Upgrades Underweight Neutral
Dec 2018 Raymond James Upgrades Underperform Outperform
Oct 2018 Bank of America Upgrades Underperform Neutral

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