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Scotts Miracle-Gro: Gross Margins in the Near Term

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SMG’s gross margins

Analysts estimate that in the next three years, sales numbers for Scotts Miracle-Gro (SMG) will trickle down to gross margins. Let’s take a look at gross income and margin estimates for SMG for the next three years and analysts’ revisions.

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Margins to expand

In the above graph, we can see clearly that Scotts Miracle-Gro’s gross income and margins are set to expand in the next three years compared to the past three years. In 2017, its gross income is estimated at $1.9 billion. On a revenue estimate of $3.0 billion, that would translate to a gross margin rate of 36.1%. It was 35.4% in 2016 with an average of 35.8% in the past three years.

For fiscal 2018 and fiscal 2019, Wall Street analysts expect SMG’s margins to expand. They estimate an expansion of 36.4% in 2018 and 37.1% in 2019.

Any advances by companies (XMLV) such as Central Garden & Pet (CENT), Spectrum Brands Holdings (SPB), and Seaboard (SEB) will weaken SMG’s margins.

Analyst revisions

Much like the revision in sales, analysts revised their gross margin estimates for Scotts Miracle-Gro upward after November 2016. Keep in mind that it was around that time that SMG acquired American Agritech (or Botinacare), which supplies the hydroponics market.

Next, let’s take a look at SMG’s EBITDA (earnings before interest, tax, depreciation, and amortization) estimates and revision.

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