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Will Scotts Miracle-Gro’s Margins Expand in 4Q17?

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Gross margins

Earlier in this series, we saw that analysts expect a YoY (year-over-year) fall in The Scotts Miracle-Gro Company’s (SMG) sales in 4Q17 and the next four quarters. However, there are expectations for cost optimization, which should improve the company’s gross margins in 4Q17 and the next four quarters.

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Analysts’ estimates

Analysts expect a gross income of $101 million for Scotts Miracle-Gro in 4Q17. It would translate into a gross margin of 27.3%—compared to 25.3% on a gross income of $101.9 in 4Q16. Similarly, the margins are expected to expand YoY in the next four quarters. Analysts expect a gross income of $1.03 billion or a gross margin of 37.7%, which would expand YoY from 36.3% on a gross income of $1.1 billion.

Compared to the estimates for its peers (XLB), Spectrum Brands Holdings (SPB) is estimated to deliver a gross margin of 38.6% over the next four quarters. Central Garden & Pet (CENT) is estimated to deliver a gross margin of 31.2%, while Andersons (ANDE) is estimated to deliver a gross margin of 9.7% over the next four quarters.

Optimization through synergies

Scotts Miracle-Gro’s sales are estimated to fall in the next four quarters. However, the gross margin is estimated to expand during the same period. The expansion is expected due to the company’s Project Focus initiative and its effort to drive cost optimization through synergies.

In the next part, we’ll discuss how the EBITDA (earnings before interest, tax, depreciation, and amortization) margins are expected to grow.

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