Better Buy: Scotts Miracle-Gro vs. Corteva Agriscience

Humans have been trying to make plants grow since the beginning of time, and modern farmers and gardeners have it much easier than it was in past generations thanks to the work of companies such as Scotts Miracle-Gro and Corteva Agriscience.

Although Scotts and Corteva cater to different areas of the global agriculture industry, they both specialize in chemicals and other products designed to improve plant performance and protect them from pests and other vulnerabilities. Both have solid, established businesses to rely on, and investors in both can hope that demographic or political trends will help fuel growth in the years to come.

Data sources: Yahoo! Finance, company filings. Data as of June 21, 2019.

Weekend gardeners are more likely to pick products from Scotts Miracle-Gro, while commercial farmers would lean toward Corteva. But which company is a better pick for investors? Here's a deep dive into the two businesses to determine which is a better buy today.

A brand-new industry leader

Corteva is a collection of well-established businesses under a new corporate banner and stock symbol. The company was formerly the agricultural units of DowDuPont, formed through a 2018 chemicals industry megamerger and spun out as an independent in early June.

The company is focused on the commercial agriculture industry, operating in more than 130 countries and generating about half of its revenue from crop protection and half from seeds. It's an important industry for a growing world, with technologies from Corteva and its rivals seen as the key to generating ever higher yields needed to feed a growing global population.

Image source: Getty Images.

But for all the long-term promise, Corteva has a troubled recent history. Unit revenue fell throughout 2018, leading then-parent DowDuPont last October to take a massive $4.6 billion impairment charge. Bad weather and a poor planting season were partially to blame, with those issues compounded by declines in corn and soybean planting acreage exacerbated by the ongoing U.S. trade war with China and a corresponding fall in demand for soybeans.

This year hasn't been much better, with farmers, and their suppliers, stung by flooding in the Midwest that has limited corn planting. No surprise Corteva's introduction to public markets has been shaky. Shares traded at $32 apiece on a "when-issued" basis leading up to the spinoff, but as of June 21 they traded 14% below that price.

Year to year, season to season, the agriculture business can be volatile, but the underlying demographic trends are in Corteva's favor. The company has targeted long-term sales growth of 3% to 5% annually, including annual organic sales growth of 1% to 2% above the market in seeds and 1.5% to 2.5% above the market for crop protection.

Seeing green from cannabis

Scotts Miracle-Gro is best known for its consumer lawn and garden products, and as the owner or marketer of brands including Ortho lawn treatment products, Roundup weed killer, and Tomcat rodent control, as well as the grass seeds and plant fertilizer products for which it gets its name.

That's a steady but not spectacular business, which tends to ebb and flow with the seasons. What has investors excited, and the stock up 58% year to date, is its emerging role as a lead supplier to the U.S. cannabis industry. A series of acquisitions by Scotts' Hawthorne Gardening subsidiary has made the unit a top supplier of hydroponics, fertilizers, and lighting systems.