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Scotts Miracle-Gro (SMG) Stock Up 16% in 3 Months: Here's Why

Zacks Equity Research

Shares of The Scotts Miracle-Gro Company SMG have gained 15.7% in the past three months. The stock outperformed the industry’s decline of 3.7% over the same time frame.

Scotts Miracle-Gro, a Zacks Rank #1 (Strong Buy) stock, has a market cap of around $5.9 billion. Average volume of shares traded in the past three months was around 502.7K. The company has expected long-term earnings per share (EPS) growth rate of 11.1%.

Let’s take a look into the factors that are driving the company.

Driving Factors

Better-than-expected third-quarter fiscal 2019 (ended Jun 29, 2019) results, upbeat view as well as favorable prospects in the Hawthorne unit are driving the company’s shares.

In the fiscal third quarter, Scotts Miracle-Gro’s adjusted earnings per share (EPS) rose 16.5% year over year to $3.11. The figure also surpassed the Zacks Consensus Estimate of $2.71.

In July, the company raised its guidance for fiscal 2019 for the second time. It now expects adjusted EPS in the band $4.35-$4.50 compared with previous expectation of $4.20-$4.40. Per the company, revised guidance for company-wide sales growth of 16-17% assumes that sales in the Hawthorne unit will increase around 90% year over year to $650 million in fiscal 2019. The U.S. Consumer segment is expected to grow 6-7%.

The company is likely to gain from the synergies of the Sunlight Supply acquisition. The buyout provides the company with modern and cost-efficient supply chain in the hydroponic industry that will benefit retail customers and end consumers. Moreover, the integration of Sunlight Supply is on track. The company continues to expect roughly $30 million in synergies from the transaction by the end of fiscal 2019.

Notably, Scotts Miracle-Gro is witnessing strong growth in the Hawthorne segment. Sales in the segment surged nearly 138% in fiscal third quarter, primarily driven by the acquisition of Sunlight Supply. Scotts Miracle-Gro is expected to benefit from continued long-term prospects and cost-saving opportunities associated with the Hawthorne division.  

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


Other Stocks to Consider

Some other top-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Alamos Gold Inc. AGI and Arconic Inc. ARNC, all sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 160% for 2019. The company’s shares have surged 85.4% in the past year.

Alamos Gold has projected earnings growth rate of 320% for the current year. The company’s shares have rallied 72.8% in a year’s time.

Arconic has an estimated earnings growth rate of 50% for the current year. Its shares have moved up 17.2% in the past year.

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