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Scotts Miracle-Gro (SMG) Tops Q3 Earnings & Sales Estimates

Zacks Equity Research

The Scotts Miracle-Gro Company SMG posted net earnings from continuing operations of $201.7 million or $3.15 per share in third-quarter fiscal 2019 (ended Jun 29, 2019), up from $82.9 million or $2.23 in the year-ago quarter.

Barring one-time items, adjusted earnings per share (EPS) came in at $3.11, up 16.5% year over year. The figure surpassed the Zacks Consensus Estimate of $2.71.

Net sales rose around 18% year over year to $1,170.3 million. The figure surpassed the consensus mark of $1,066 million.

Company-wide gross margin rate rose to 36.2% from 34.9% in the year-ago quarter.  

The Scotts Miracle-Gro Company Price, Consensus and EPS Surprise

 

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 Details

In the fiscal third quarter, net sales in the U.S. Consumer division rose roughly 10% year over year to $889.1 million. The segment’s profit rose 12% year over year to $271.5 million.

Net sales in the Hawthorne segment surged nearly 138% to $176.3 million in the quarter, which was primarily driven by the acquisition of Sunlight Supply. The segment generated profit of $16.8 million against net loss of $3.6 million in the year-ago quarter.

Net sales in the Other segment, which comprises the company’s consumer lawn and garden business in regions other than the United States, fell 4% to $104.9 million. The segment’s profit inched up 1% year over year to $13.2 million.

Balance Sheet

At the end of the fiscal third quarter, Scotts Miracle-Gro had cash and cash equivalents of $36.4 million, up around 23% year over year. Long-term debt was $1,563.5 million, down roughly 20.9%.

Outlook

Scotts Miracle-Gro increased its fiscal 2019 guidance for the second time.

It now expects adjusted EPS in the band $4.35-$4.50 compared with $4.20-$4.40 expected earlier. 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%.

Free cash flow is expected to be nearly $325 million, which excludes the impact of anticipated litigation payments as well as one-time tax payment related to the sale of its minority interest in TruGreen.  

Price Performance

Shares of Scotts Miracle-Gro have rallied 46.3% in the past year against the industry’s 10.3% decline.



Zacks Rank & Other Key Picks

Scotts Miracle-Gro currently sports a Zacks Rank #1 (Strong Buy).

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

SSR Mining has an expected earnings growth rate of 134.8% for 2019. The company’s shares have surged 49.1% in the past year.

Kinross has projected earnings growth rate of 100% for the current year. The company’s shares have gained 17.6% in a year’s time.

Arconic has an estimated earnings growth rate of 38.2% for the current year. Its shares have moved up 18.9% in the past year.

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