Scotts Miracle-Gro (SMG) Q1 Earnings and Sales Beat Estimates
Scotts Miracle-Gro SMG incurred a loss of $64.7 million or $1.17 per share in the first quarter of fiscal 2023 (ending Dec 31, 2022), 29% wider than the loss of $50 million or 90 cents per share reported in the prior-year quarter.
Barring one-time items, the adjusted loss was $1.02 per share compared with a loss of 88 cents a year ago. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.40.
The company’s net sales in the first quarter were $526.6 million, which topped the Zacks Consensus Estimate of $503.5 million. Net sales decreased around 7% year over year. The top line declined primarily due to lower sales in the Hawthorne segment resulting from the weakness in the hydroponic industry.
Company-wide gross margin rate (as adjusted) was 18.2% compared with 21% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume loss at Hawthorne, increased commodity costs and reduced production volumes in the U.S. consumer business. These were partly offset by price increases and a favorable segment mix.
The Scotts Miracle-Gro Company Price, Consensus and EPS Surprise
The Scotts Miracle-Gro Company price-consensus-eps-surprise-chart | The Scotts Miracle-Gro Company Quote
Segment Highlights
In the first quarter, net sales in the U.S. Consumer division were up 8% year over year to $369 million. The segment recorded a profit of $31.3 million, up 193%.
Net sales in the Hawthorne segment tumbled 31% year over year to $131.5 million in the reported quarter. The segment reported a loss of $16.2 million, 206% wider than the year-ago loss of $5.3 million.
Net sales in the other segment fell 21% year over year to $26.1 million. The segment reported a profit of $1.4 million, up 8%.
Financials
At the end of the first quarter, SMG had cash and cash equivalents of $25.6 million, up around 56.1% year over year. Long-term debt increased approximately 3.5% to $3,189.6 million.
Outlook
Moving ahead, the company anticipates a low single-digit percentage decline in net sales and gross margin rate for fiscal 2023. It expects its adjusted operating income to grow by a low single-digit percentage in fiscal 2023. SMG’s net sales for its Hawthorne segment are expected to decline 20% to 30%. It also sees low single-digit percentage year-over-year growth in adjusted EBITDA for fiscal 2023. SMG expects a free cash flow of $1 billion over the next two years.
Price Performance
SMG’s shares are down 40% over a year against a 14.5% rise recorded by its industry.
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Zacks Rank & Key Picks
Scotts Miracle-Gro currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks to consider in the basic materials space include Commercial Metals Company CMC, Nucor Corporation NUE and Agnico Eagle Mines Limited AEM. CMC and NUE both sport a Zacks Rank #1 (Strong Buy), while AEM carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CMC’s shares have gained 59.8% in the past year. The Zacks Consensus Estimate for CMC’S current-year earnings has been revised 9.8% upward in the past 60 days. The firm outpaced Zacks Consensus Estimate in all of the last four quarters. It delivered a trailing four-quarter earnings surprise of 16.7% on average.
Nucor’s shares have gained 55.8% in the past year. The Zacks Consensus Estimate for NUE’S current-year earnings has been revised 10.6% upward in the past 60 days. The company topped Zacks Consensus Estimate in all of the last fourth quarters. It delivered a trailing four-quarter earnings surprise of 7.7% on average.
Agnico’s shares have gained 18.8% in the past year. The Zacks Consensus Estimate for AEM’S current-year earnings has been revised 0.4% upward in the past 60 days.
Agnico Eagle beat Zacks Consensus Estimate in three of the last four quarters. It delivered a trailing four-quarter earnings surprise of 26.4% on average.
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