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Scotts Miracle-Gro Hits 52-Week High: What's Driving it?

Zacks Equity Research

Shares of The Scotts Miracle-Gro Company SMG scaled a fresh 52-week high of $101.12 on Jul 8, before closing the session at $100.10.

The company has a market cap of roughly $5.6 billion. Average volume of shares traded in the past three months was around 429.3K. The company has expected long-term earnings per share (EPS) growth rate of around 10.6%.

The stock has gained 62.8% year to date, significantly outperforming the industry’s 1.6% rise.



What’s Driving the Rally?

Upbeat outlook for fiscal 2019 has contributed to the gain in Scotts Miracle-Gro’s shares. Last month, the company provided a revised outlook for fiscal 2019. It expects company-wide sales to improve 13-14% year over year in the fiscal, factoring in stronger-than-expected performance in the Hawthorne and U.S. Consumer segments.

It also raised its adjusted EPS outlook on a full-year basis to the range of $4.20-$4.40 from the prior guidance of $4.10 to $4.30.

Scotts Miracle-Gro stated that on a company-wide basis, sales in the U.S. consumer unit are projected to improve 3-4% from 2018 levels compared with the previous view of a rise of 1-2%. Notably, sales in the Hawthorne segment are expected to surge 75-80%. On a company-wide basis, the segment is expected to contribute roughly 10 points growth, up from the initial expectation of 8-9%.

Per management, the Hawthorne segment is benefiting from strong growth in long-standing markets like California along with emerging ones like Michigan and Florida. The company is currently expecting stronger sales growth in the U.S. Consumer business. This can be attributed to higher-than-planned sales of mulch products along with higher retailer engagement on a year-over-year basis.

Moreover, consumer purchases of core lawn and garden products were up 4% entering fiscal June 2019. This was mainly driven by consistent demand for mulch, soils, weed control and lawn care products.

Earnings estimates for Scotts Miracle-Gro for fiscal 2019 have also moved up in the past two months. Over this period, the Zacks Consensus Estimate for the fiscal has inched up around 0.9%. The Zacks Consensus Estimate for earnings for fiscal 2019 is currently pegged at $4.33 per share, reflecting expected year-over-year growth of 16.7%. The same for the fiscal third quarter is pegged at $2.74, indicating expected year-over-year rise of 2.6%.  

The Scotts Miracle-Gro Company Price and Consensus

 

The Scotts Miracle-Gro Company Price and Consensus

The Scotts Miracle-Gro Company price-consensus-chart | The Scotts Miracle-Gro 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 BHP Billiton Limited BHP, Flexible Solutions International Inc FSI and Fortescue Metals Group Ltd FSUGY. These stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP Billiton has an expected earnings growth rate of 39.9% for 2019. The company’s shares have gained 11.8% in the past year.

Flexible Solutions has projected earnings growth rate of 342.9% for the current year. The company’s shares have surged 162.5% in a year’s time.

Fortescue Metals has an estimated earnings growth rate of 294.2% for the current year. Its shares have rallied 85.3% in the past year.

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