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Scotts Miracle-Gro Up 29% in 6 Months: What's Driving It?

Zacks Equity Research

Shares of The Scotts Miracle-Gro Company SMG have gained 28.5% in the past six months against the industry’s 20.5% decline and the S&P 500’s 4.7% fall.



The company has a market cap of around $7.4 billion. Average volume of shares traded in the past three months was nearly 529.2K. The company has an expected earnings per share (EPS) growth rate of 30.4% for fiscal 2020.

Let’s analyze the factors that are driving the stock.

Driving Factors

Upbeat views and bright prospects in the Hawthorne business stemming from Sunlight Supply buyout are contributing to the company’s price performance.

Recently, the company raised its fiscal 2020 guidance based on higher demand in the U.S. Consumer and Hawthorne segments.

For fiscal 2020 (ending Sep 30, 2020), Scotts Miracle-Gro projects company-wide sales growth in the range of 16-18% compared with 6-8% growth expected earlier. The upbeat view is primarily due to stronger growth in the U.S. Consumer unit, where the company now expects 9-11% growth compared with the previous range of 1-3% increase. In the Hawthorne segment, the company now expects sales growth of 45-50% for fiscal 2020 compared with 30-35% expected earlier.

Based on the above assumptions, the company now projects adjusted EPS in the range of $5.65-$5.85 compared with $4.95-$5.15 expected earlier. Further, Scotts Miracle-Gro expects adjusted gross margin rate to be flat-to-slightly lower in fiscal 2020 as the strength in Hawthorne has a dilutive impact on the company-wide rate.

The company is also benefiting from synergies of the Sunlight Supply acquisition. The buyout has provided Scotts Miracle-Gro with a modern and cost-efficient supply chain in the hydroponic industry.  The acquisition is expected to contribute to the growth in adjusted EPS and total sales in fiscal 2020.  

 

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 sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the basic materials space are Barrick Gold Corporation GOLD, Royal Gold, Inc. RGLD and Franco-Nevada Corporation FNV, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick has an expected earnings growth rate of 54.9% for 2020. The company’s shares have surged 70.2% in the past year.

Royal Gold has an expected earnings growth rate of 66.2% for fiscal 2020. Its shares have returned 26.7% in the past year.

Franco-Nevada has an expected earnings growth rate of 19.2% for 2020. The company’s shares have surged 64.3% in the past year.

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