uploads///EBITDA and EBITDA Margin

SMG’s Margin Expectations Could Be Concerning


Dec. 4 2020, Updated 10:53 a.m. ET

EBITDA margins

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Margins to decline

The Scotts Miracle-Gro Company is estimated to report EBITDA (earnings before interest, tax, depreciation, and amortization) of $246 million, which would translate into a margin of 24.5% on sales estimates of $1 billion, in the upcoming third quarter. For the next four quarters, the company is expected to report EBITDA of $505 million, which would translate into an EBITDA margin of 17.5%.

The EBITDA margins for the next four quarters show a contraction from 19.4% from the last four quarters. The company’s EBITDA is expected to decline by 3% over the same period, while sales are estimated to grow by 7%. These projections indicate the company could see cost headwinds in the next four quarters.

The concerns

These projections exclude any cost impacts from the company’s interest expense on debt obligations, which have increased in recent years. With contracting margins and an increase in debt obligations, it’s clear why Scotts Miracle-Gro Company has come under selling pressure, as it failed to live up to the recent two earnings expectations.

However, depending on how the cannabis sector (MJ) shapes up, things could change for SMG. However, we must be careful when we use margin assumptions for SMG from Canopy Growth (WEED), Aurora Cannabis (ACB), and Aphria (APHQF).


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