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Scotts Miracle-Gro (SMG) Tops Q1 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 $25.2 million or 43 cents per share in first-quarter fiscal 2021 (ended Jan 2, 2021) against a net loss of $71.3 million or $1.28 per share in the year-ago quarter.

The company has historically reported a loss during its first quarter thanks to the seasonal nature of the lawn and garden industry. The 2021 results signify the first time it has reported a first-quarter profit.

Barring one-time items, adjusted earnings per share (EPS) were 39 cents per share, up 134.8% year over year. The figure topped the Zacks Consensus Estimate of a loss of 73 cents.

Net sales surged 104.6% year over year to $748.6 million and beat the consensus mark of $616 million.

Company-wide gross margin rate (as adjusted) was 26.7% compared with 14.9% in the year-ago quarter.

These results are primarily driven by strong retailer support in the U.S. Consumer segment 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 first quarter, net sales in the U.S. Consumer division increased 147% year over year to $408.2 million. The segment reported profits of $45.3 million against a loss of $40.1 million in the prior-year quarter.

Net sales in the Hawthorne segment rose 71% year over year to $309.4 million in the reported quarter. The segment’s profits skyrocketed 223% year over year to $40.4 million.

Net sales in the Other segment increased 58% year over year to $31 million. The segment reported no profit or loss in the quarter compared with a loss of $3.5 million in the prior-year quarter.

Balance Sheet

At the end of first quarter, the company had cash and cash equivalents of $21.5 million, down 21.5% year over year. Long-term debt was $1,979.8 million, up 0.5% year over year.

Outlook

The company expects sale growth of 1-6% in fiscal 2021 compared with 0-5% expected earlier. Sales guidance in the Hawthorne segment was raised to 20-30% from 15-20% expected previously. U.S. Consumer sales guidance has been reaffirmed at 0 to -5%.

The adjusted EPS guidance of $8.00-$8.40 is reaffirmed as well. The company stated that it now expects SG&A to drop 3-8% from 2020 levels, compared with the previous estimate of a 6-11% year-over-year decline.

The adjusted gross margin rate is now projected to decline 125-175 basis points (bps) year-over-year. This updated guidance for gross margin rate compares with the previously anticipated decline of 50 bps.

Price Performance

Shares of Scotts Miracle-Gro have surged 93.8% in the past year compared with 30.7% 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 Fortescue Metals Group Limited FSUGY, BHP Group BHP and Impala Platinum Holdings Limited IMPUY.

Fortescue has a projected earnings growth rate of 74.2% for the current fiscal. The company’s shares have surged around 124.9% in a year. It currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP has an expected earnings growth rate of 59.5% for the current fiscal. The company’s shares have gained around 26.8% in the past year. It currently flaunts a Zacks Rank #1.

Impala has an expected earnings growth rate of 189.4% for the current fiscal. The company’s shares have rallied around 39.4% in the past year. It currently sports a Zacks Rank #1.

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