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Why Scotts Miracle-Gro Stock Fell 14% on January 30

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Scotts Miracle-Gro’s earnings

On Tuesday, January 30, 2018, Scotts Miracle-Gro (SMG) reported its 1Q18 earnings with a GAAP (generally accepted accounting principles) loss per share of $0.35. That compares to $0.97 in 1Q17. The company reported a non-GAAP loss per share of $1.08 compared to $0.88 in 1Q17.

However, the loss was better than analysts’ mean estimate of a loss per share of $0.91. SMG stock took a significant beating. Let’s look at that in more detail.

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Stock reacted

The company’s 1Q18 earnings release clearly didn’t impress investors, and the stock fell 14% to $91.90 per share when the market closed. In the above chart, you can see that the company’s fourth and the first quarters usually report losses since they are in the winter months.

Why did SMG fall?

SMG’s core business has experienced a slowdown, and the company has actively pivoted to other avenues of growth. With the increase in cannabis legalization for recreational purposes in the United States and Canada, the company acquired companies that can serve the needs of cannabis growers through technologies related to indoor gardening.

Unlike Canopy Growth (WEED), Aurora Cannabis (ACBFF), and Medreleaf (LEAF), SMG doesn’t grow cannabis (MJX).

Investors who put their money in the cannabis market were disappointed with SMG’s 1Q18 results, which fell short of expectations. In the next part, let’s see why that happened.

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