Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Buy Scotts Miracle-Gro (SMG) Stock Before Earnings?

By Zacks Investment ResearchStock MarketsNov 03, 2020 07:59AM ET
www.investing.com/analysis/buy-scotts-miraclegro-smg-stock-before-earnings-200543253
Buy Scotts Miracle-Gro (SMG) Stock Before Earnings?
By Zacks Investment Research   |  Nov 03, 2020 07:59AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Scotts Miracle-Gro SMG shares have jumped 50% in 2020 even though they have moved mostly sideways during the past three months. Despite its recent underperformance, the lawn care products firm that is also benefiting from the booming legal marijuana business in North America, boasts some solid fundamentals heading into the release of its Q4 FY20 financial results before the opening bell on Wednesday, November 4.

Home Projects & Marijuana Exposure

Scotts Miracle-Gro is a consumer lawn and garden products powerhouse that operates under both The Company’s Scotts and Miracle-Gro brands, as well as Ortho. Wall Street has also grown enamored with its Hawthorne Gardening segment, which is a leader in the hydroponic industry. This helps Scotts Miracle-Gro gain huge exposure to the growing marijuana market, as well as indoor farming in general.

Scotts Miracle-Gro’s sales have climbed by at least 15% for eight quarters in a row. Last quarter (Q3 FY20), the firm’s revenue soared 28%, with Hawthorne up 72%. The company’s hydroponic space has helped SMG achieve this strong top-line expansion over the past two years and it stands to benefit for years, if not decades to come as part of the broader push for marijuana legalization in the U.S. and beyond.

The company has also benefitted from increased home improvement spending, alongside the likes of Home Depot (NYSE:HD) HD, Lowe’s (NYSE:LOW) LOW, RH (NYSE:RH) RH, and more. More importantly, this trend could continue for a while as the housing market grows. And investors should note that the housing market is finally being driven by millennials, as the largest portion of the generation starts to get married and have kids.

U.S. home sales surged 10.5% on an annual basis in August, which came after July’s huge growth that represented the strongest monthly gain ever recorded, dating back to 1968. The impressive home-buying data continued in September, with sales of previously owned homes at a 14-year high in September—existing-home sales jumped 9.4% from August.

What Else…

Scotts announced at the end of July a “special dividend of $5 per share” and it lifted its regular quarterly dividend by 7%. This helped showcase its strong position and management’s confidence in its continued success. SMG’s 1.6% dividend yield nearly doubles the 10-year U.S. Treasury’s average and comes in near the S&P 500 average.

Meanwhile, the nearby chart shows that SMG stock is up around 130% in the past five years to easily top the S&P 500. SMG shares have climbed 55% in the past year and 23% in the last six months. It has, however, cooled off recently and closed regular trading Monday at $155 a share. This puts it about 12% off its 52-week highs, which might make it more attractive to some investors.

The stock is also trading at a discount against the S&P 500’s average and its own one-year median in terms of forward 12-month earnings at 19.5X.

Scotts in mid-September raised its fiscal 2020 outlook. “The drivers of our business over the past six months – strong consumer demand and highly engaged retailer support – are expected to carry into the first quarter of fiscal 2021 and give us a solid start to the year,” CFO Randy Coleman said in prepared remarks.

“We continue to expect lower expenses next year will provide tailwinds of roughly a dollar per share. We will provide more details when we provide fiscal 2021 guidance in November.”

With this in mind, Zacks estimates call for SMG’s fourth quarter revenue to soar a whopping 78% from $498 million in the year-ago period to $884.6 million. This is expected to help the company swing from an adjusted loss of -$0.91 a share to +$0.07 per share in Q4. Overall, Scotts adjusted fiscal 2020 earnings are projected to surge over 62% to reach $7.26 a share on 31% stronger revenue—which would come on top of FY19’s 19% sales growth.

Bottom Line

SMG’s positive earnings revisions activity helps it grab a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grade for Growth in our Style Scores system. The company has also topped our bottom-line estimates for three straight periods by an average of over 10%.

Clearly, the market faces near-term uncertainty in the form of the election and the virus. Yet, investors with a longer-term horizon might want to consider Scotts as a play on the housing market, marijuana, and more.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Home Depot, Inc. (HD): Free Stock Analysis Report

Lowes Companies, Inc. (LOW): Free Stock Analysis Report

RH (RH): Free Stock Analysis Report

The Scotts MiracleGro Company (SMG): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research
Buy Scotts Miracle-Gro (SMG) Stock Before Earnings?
 

Related Articles

Buy Scotts Miracle-Gro (SMG) Stock Before Earnings?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email