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Scotts Miracle-Gro Gains on Strong Demand & Hawthorne Unit

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·3 min read
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We issued an updated research report on The Scotts Miracle-Gro Company SMG on Apr 7.

Strong Demand to Support Margins 

In March, Scotts Miracle-Gro issued preliminary results for second-quarter fiscal 2020 (ending Mar 28, 2020).

The company stated that the demand for its U.S. Consumer and Hawthorne businesses has witnessed a surge in recent weeks, particularly in edible gardening, professional growing and pest-control-focused categories.

It expects company-wide sales to rise 16-17% year over year in the fiscal second quarter. Sales in the U.S. Consumer and Hawthorne units are expected to increase around 12% and at least 55% in the quarter, respectively.

In the U.S. Consumer division, the company witnessed a sharp rise in demand in March, which is expected to boost consumer purchases by nearly 25% in the fiscal second quarter. Moreover, purchases of soil and insect control rose roughly 35% and 45% in March, respectively.

Hawthorne Division Remains Key Growth Driver

The company continues to see outstanding performance across all product categories in the Hawthorne business in the United States. Net sales in the Hawthorne segment climbed 41% year over year in fiscal first quarter on the back of strong demand. The momentum is expected to continue in the fiscal second quarter.

Synergies of Sunlight Supply Acquisition 

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. Notably, net sales in the Hawthorne segment surged 95% in fiscal 2019, partly driven by the favorable impact of Sunlight Supply buyout.

Price Performance

Shares of the company have gained 25.3% in the past year against the industry’s 37.1% decline.



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 Franco-Nevada Corporation FNV, Novagold Resources Inc. NG and Barrick Gold Corporation GOLD, all currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franco-Nevada has an expected earnings growth rate of 22% for 2020. Its shares have returned 43.9% in the past year.   

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 98.5% in the past year.

Barrick has an expected earnings growth rate of 41.2% for 2020. The company’s shares have gained 48.1% in the past year.

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Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
 
The Scotts Miracle-Gro Company (SMG) : Free Stock Analysis Report
 
Novagold Resources Inc. (NG) : Free Stock Analysis Report
 
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