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Scotts Miracle-Gro Down 10% On Profit Warning

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Scotts Miracle-Gro Company Class A (SMG) dropped 10% on Wednesday after releasing revised numbers for 2022 revenue and adjusted earnings. 

The company now estimates an adjusted earnings per share between $4.50 and $5.00, significantly lower than its initial 2022 prediction of $8.00, which it called "likely unattainable." Retail orders for the company came in $300 million lower than estimates for May 2022.

In total, 119 ETFs hold SMG shares. The Cambria Cannabis ETF (TOKE) has the largest SMG exposure, at 9.11%. In fact, the top three ETFs are all heavily invested in the cannabis industry.

 

 

All together, 5.5 million shares of SMG are held in ETFs. At the top of the list is the iShares Core S&P Mid-Cap ETF (IJH), which has 1.16 million shares, or roughly 21% of this total. The stock seems to sit near the division between the small cap and midcap segments.

 

 

Scotts Miracle-Gro is held by 37 vanilla, cap-weighted ETFs, accounting for about 31% of all funds. It is by far the largest category of ETFs holding SMG

 

 

Old Company, New Business 

Founded in 1868, Scotts Miracle-Gro has been a staple of the American agriculture industry, selling seed, lawn and pest control products for more than 150 years.

Since 2014, though, the company has become a big name in cannabis. It started with the formation of Hawthorne, its hydroponic growing subsidiary, which, at the time, was one of the first big investments by a major U.S. corporation into the cannabis industry.

Outspoken about its belief that cannabis legalization is a matter of "when," not "if," the company has made moves in the past few years to both expedite the federal legalization and position itself to eventually sell cannabis directly to consumers.

To this point, its early investments in cannabis have paid off. In 2021, Hawthorne accounted for nearly 30% of Scotts' total sales. This division of the company has also seen a growth of 5% in each of the last three years.

2022 doesn't look like it will be a banner year for Hawthorne, though. CEO Jim Hagedorn said it expects a 4-6% decrease in U.S. consumer sales overall, and as much as a 40% drop in Hawthorne sales for its year ending on September 30, 2022.

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