Raymond James Raises PT On Scotts Miracle-Gro Following Q1 Earnings

Analysts at Raymond James reiterated their rating on Scotts Miracle-Gro Co (NASDAQ: SMG), even though the company's fiscal first quarter results were "somewhat" below their expectations. Nevertheless, the analysts saw a number of "encouraging" signs in the earnings report.

The Analyst

 Joseph Altobello reiterated his Outperform rating on the Scotts Miracle-Gro and raised the price target from $71 to $80. 

The Thesis

Scotts Miracle-Gro posted an adjusted net loss of $1.39 per share, which was 29 percent lower than Raymond James' estimate of $1.15 and below the consensus of $1.25. Altobello pointed out that the miss was mostly due to temporary Cost of Goods Sold and non-operating items such as a lower tax rate and diluted share count.

The company's earnings of $298.1 million grew by 35 percent on the year, slightly lower than the 38 percent the analyst had expected.

Altobello also pointed out that Scotts Miracle-Gro's U.S. consumer segment enjoyed a 9-percent sales growth during the quarter, which was above their estimates of a 1-percent growth.

The cannabis-focused Hawthorne subsidiary grew its sales by 84 percent, versus Raymond James' expectations of 108 percent. Hawthorne sales were boosted by the acquisition of Sunlight Supply, but on a comparable basis the sales fell by less than 10 percent on the year, which is an improvement from the previous quarters' drops of 30-40 percent. 

In this way, Altobello said, Scotts Miracle-Gro is showing solid trends for its U.S. consumer segment and the integration of Sunlight is well on track to provide synergies of around $0.60 per share.

Price Action

Scotts Miracle-Gro's stock closed Friday $74.18. 

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