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Scotts Miracle-Gro (SMG) Tops Q2 Earnings and Sales Estimates

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·4 min read
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The Scotts Miracle-Gro Company SMG reported net income from continuing operations of $311.1 million or $5.44 per share in second-quarter fiscal 2021 (ended Apr 3, 2021) compared with a net profit of $249.8 million or $4.43 per share in the year-ago quarter.

Barring one-time items, adjusted earnings per share (EPS) were $5.64 per share, up 25.3% year over year. The figure topped the Zacks Consensus Estimate of $5.51.

Net sales rallied 32.3% year over year to $1,828.8 million and beat the consensus mark of $1,739.5 million. Sales were driven by strong volume growth in its key segments.

Company-wide gross margin rate (as adjusted) was 36.6% compared with 40% in the year-ago quarter.

The company’s results are driven by higher retailer support for its lawn and garden products and continued momentum in the Hawthorne segment.

The Scotts MiracleGro Company Price, Consensus and EPS Surprise

The Scotts MiracleGro Company Price, Consensus and EPS Surprise
The Scotts MiracleGro Company Price, Consensus and EPS Surprise

The Scotts MiracleGro Company price-consensus-eps-surprise-chart | The Scotts MiracleGro Company Quote

Segment Details

In the second quarter, net sales in the U.S. Consumer division increased 23% year over year to $1,374 million. The segment reported profits of $435.9 million, up from a profit of $374.6 million in the prior-year quarter.

Net sales in the Hawthorne segment rose 66% year over year to $363.8 million in the reported quarter. The segment’s profits increased 74% year over year to $41.4 million.

Net sales in the Other segment increased 82% year over year to $91 million. The segment’s profits skyrocketed 340% year over year to $17.6 million.

Balance Sheet

At the end of second quarter, the company had cash and cash equivalents of $14.4 million, down 53.2% year over year. Long-term debt was $2,322.5 million, up 9.9% year over year.

Outlook

The company raised sales guidance in the Hawthorne segment for fiscal 2021 to 30-40% from 20-30% expected previously. U.S. Consumer sales growth guidance has been reaffirmed at 4-6%.

The gross margin rate is now projected to decline 175-225 basis points (bps) year over year.

The company noted that the margin pressure due to higher commodity and distribution costs is likely to continue in the third quarter, which is expected to be moderate in the fourth-quarter.

Price Performance

Shares of Scotts Miracle-Gro have surged 71.9% in the past year compared with 91.9% rise of the industry.

Zacks Rank & Key Picks

Scotts Miracle-Gro currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Dow Inc. DOW, Nucor Corporation NUE and Impala Platinum Holdings Limited IMPUY.

Dow has a projected earnings growth rate of roughly 261.5% for the current year. The company’s shares have surged 101.1% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has an expected earnings growth rate of around 228.4% for the current year. The company’s shares have gained 126.8% in the past year. It currently sports a Zacks Rank #1.

Impala has an expected earnings growth rate of 197.6% for the current fiscal. The company’s shares have skyrocketed 215% in the past year. It currently flaunts a Zacks Rank #1.

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