The Scotts Miracle-Gro Company (SMG) is set to announce its third-quarter earnings on July 31 after the market closes. The company missed earnings estimates in both the first and second quarter. As a result, the stock took a beating.
Cannabis or agribusiness?
YTD (year-to-date), the company’s stock has lost about 24.8%, while the benchmark VanEck Vectors Agribusiness ETF (MOO) has delivered a 0.5% return. While MOO’s returns aren’t stellar, it has preserved investors’ capital at least.
An agribusiness ETF may not be the most appropriate benchmark, since the company is pivoting towards the cannabis sector. Even then, the stock has underperformed the benchmark Horizons Marijuana Life Sciences ETF (HMMJ), which fell by about 23%.
The cannabis sector is still in its nascent stage and companies are just getting started. Many businesses have popped up to grab a piece of this emerging sector. While Scotts Miracle-Gro does not grow cannabis like Canopy Growth (CGC) (WEED) and Aurora Cannabis (ACB) (ACBFF), it offers products that support indoor gardening, which are suitable for cannabis growers through the Hawthorne Gardening division.
In this series, we’ll look at sales, EBITDA (earnings before interest, tax, depreciation, and amortization), and earnings estimates for the upcoming fiscal third-quarter results.