SMG’s key revenue source
The majority of Scotts Miracle-Gro’s (SMG) sales come from the United States. The company’s sales are seasonal with most of its sales coming in the late winter through spring, or the company’s second and third fiscal quarters. Scotts Miracle-Gro has averaged sales growth of ~4% over the past 14 years. Will 2017 be different?
For 1Q17, Wall Street analysts expect Scotts Miracle-Gro to report $233 million in revenue, which would be a 5.3% decline compared to $246 million in 1Q16. As noted earlier, most of the company’s revenue is generated in the second and the third quarters, so it’s important to look at full-year sales estimates as well. For the full-year 2017, analysts expect Scotts Miracle-Gro to report $3.0 billion in revenue, which would translate into a 5.1% growth year-over-year.
2017 revenue growth is estimated to be better than the 14-year average of ~4% annually.
Scotts Miracle-Gro says sales volume, product pricing, sales growth through acquisition, and foreign exchange are its key growth drivers. Lately, over the past two years, the company’s sales have been positively driven by acquisition and sales volume while pricing and fluctuation in foreign exchange had the opposite effect on the company’s sales.
Pricing and sales volume may move inversely to each other. Balancing these two is important, as the company could lose some market share to companies such as Central Garden & Pet (CENT), Spectrum Brands (SPB), and Seaboard (SEB).
Given the company’s focus on US markets (SOIL), acquisitions could take top priority in 2017. Next, we’ll discuss SMG’s profitability.