Why Is Scotts (SMG) Up 6% Since Last Earnings Report?
It has been about a month since the last earnings report for Scotts Miracle-Gro (SMG). Shares have added about 6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Scotts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Scotts Miracle-Gro’s Q4 Earnings & Sales Beat Estimates
Scotts Miracle-Gro reported a fourth-quarter fiscal 2023 (ended Sep 30, 2023) loss of $468.4 million or $8.33 per share compared with a loss of $220.1 million or $3.97 per share in the year-ago quarter.
Barring one-time items, the adjusted loss was $2.77 per share, wider than a loss of $2.04 a year ago. The figure was narrower than the Zacks Consensus Estimate of a loss of $2.83.
Net sales fell around 24.1% year over year to $374.5 million but surpassed the consensus mark of $331.2 million. The decline in sales was due to lower sales in the U.S. Consumer and Hawthorne segments.
Segment Details
In the fiscal fourth quarter, net sales in the U.S. Consumer division were down 33% year over year to $201 million. It was higher than our estimate of $173 million.
Net sales in the Hawthorne segment tumbled 11% year over year to $149.7 million in the reported quarter. The figure was higher than our estimate of $149 million.
Net sales in the other segment increased 3% year over year to $23.8 million.
Balance Sheet
At the end of fiscal 2023, the company had cash and cash equivalents of $31.9 million, down from $86.8 million in fiscal 2022. Long-term debt was $2,557.4 million, down from $2,826.2 million in fiscal 2022.
FY2024 Outlook
The company noted that its outlook for fiscal 2024 incorporates significant progress on margin recovery while adjusting for a higher share count, effective tax rate and average cost of borrowing compared with fiscal 2023.
It has developed an aggressive operating plan for fiscal 2024 that is built upon strong engagement with retailer partners and sustained diligence with cost management, free cash flow generation and debt repayment.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -61.5% due to these changes.
VGM Scores
At this time, Scotts has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Scotts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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The Scotts Miracle-Gro Company (SMG) : Free Stock Analysis Report
