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Scotts Miracle-Gro: Analysts’ Ratings after Q4


Nov. 25 2019, Published 8:32 a.m. ET

Scotts Miracle-Gro Company (SMG) released its fiscal 2019 fourth-quarter and full-year earnings results on November 6. The company is a leading marketer of hydroponic growing products. Its stock has fallen 3.55% since its earnings release.

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Scotts Miracle-Gro’s financial highlights

The company’s revenue for the quarter stood at $497.7 million, implying a sequential increase of 15%. It also reported an 18% gross margin for the quarter compared to 17% last year. It further reported a $55.5 million seasonal loss in continuing operations. Its adjusted loss for the quarter stood at $50.7 million.

The company’s revenue for the full year stood at $3.16 billion, implying an increase of 18% from last year’s revenue of $2.66 billion. It also reported a 32.3% gross margin for the year. Its net profit for the year stood at $251.8 million, implying an 18.9% increase from the previous year. Its operating cash flow was $226.8 million compared to $342.5 million last year. The decline was mainly the result of one-time litigation settlements and tax payments of $145 million.

Hawthorne Gardening’s results

Scotts Miracle-Gro created Hawthorne Gardening as a separate segment to combine its cannabis operations and its indoor gardening operations. Hawthorne’s sales for the quarter stood at $210 million, implying an increase of 38% sequentially. Hawthorne’s sales have increased across almost all product levels. Hawthorne also reported revenue of $671.2 million for the full year, an increase of 95% from the previous year. This increase was mainly the result of increasing demand and the impact of the Sunlight Supply acquisition.

Scotts Miracle-Gro CEO Jim Hagedorn said, “The momentum in Hawthorne has been building all year and we saw our highest levels of organic growth in the fourth quarter, giving us a high degree of confidence as we look ahead into fiscal 2020.”

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Fiscal 2020 guidance

Following its fiscal 2019 fourth-quarter earnings report, the company released its guidance for fiscal 2020. It expects continued growth in its major segments. Management expects the company’s sales to grow by 4%–6%. It also expects Hawthorne’s revenue to grow roughly 12%–15%.

The company also expects to report EPS in the range of $4.95–$5.15. Further, it expects its free cash flow to be around $300 million in fiscal 2020.

Analysts’ recommendations and target price

The number of analysts covering Scotts Miracle-Gro has remained constant for the last 12 months. Right now, seven analysts are covering the stock. Two recommend “strong buys,” two recommend “buys,” and three recommend “holds” on the stock. It doesn’t have any “sell” or “strong sell” recommendations. These ratings are consistent from last month.

The stock’s consensus target price is currently around $115.00, a potential upside of 15% from its current price. Analysts revised this target price following its fourth-quarter results.

Scotts Miracle-Gro versus its cannabis peers

SMG is currently trading at $100, up 49.79% YTD (year-to-date). Among its cannabis peers, Canopy Growth (CGC) (WEED) is down 37.88% YTD, Tilray (TLRY) is down 69.6% YTD, and Cronos Group (CRON) is down 38% YTD. Most cannabis companies have released disappointing quarterly financials. As a result, the cannabis sector continues to show a declining trend.


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