Scotts Miracle-Gro (SMG) Misses on Q1 Earnings, Tops Sales
The Scotts Miracle-Gro Company
SMG posted net loss from continuing operations of $82.6 million or
$1.49 per share in first-quarter fiscal 2019 (ended Dec 29, 2018),
wider than a loss of $20 million or 35 cents in the year-ago
quarter.
Barring one-time items, adjusted loss came in at $1.39 per share,
which was wider than the Zacks Consensus Estimate of a loss of
$1.24.
Net sales rose roughly 35% year over year to $298.1 million. The
figure beat the Zacks Consensus Estimate of $294.7 million.
Company-wide gross margin rate declined to 11.6% from 15.3% in the
year-ago quarter. Margins were affected by expected increase in
freight costs along with mark-to-market adjustments on fuel
hedges.
Per the company, results in the quarter were impacted on a
year-over-year basis due to the timing of business, which is
expected to be offset later in this fiscal.
The Scotts Miracle-Gro Company Price, Consensus and EPS Surprise
The Scotts Miracle-Gro Company Price, Consensus and EPS Surprise | The Scotts Miracle-Gro Company Quote
Segment Review
In fiscal first quarter, net sales in the U.S. Consumer division
rose roughly 9% year over year to $136.9 million, primarily on
early shipments to some retail partners compared with the year-ago
quarter. However, the segment incurred net loss of $43.1 million,
wider than net loss of $37.9 million in the prior-year
quarter.
Net sales in the Hawthorne segment jumped around 84% to $140.8
million in the quarter, which was mainly driven by the acquisition
of Sunlight Supply. The segment’s profitability surged 159% year
over year to $4.4 million.
Net sales in the Other segment, which comprises the company’s
consumer lawn and garden business in regions other than the United
States, rose 8% to $20.4 million. The segment posted a net loss of
$4 million, unchanged from the year-ago quarter’s tally.
Balance Sheet
As of Dec 29, 2018, Scotts Miracle-Gro had cash and cash
equivalents of $22.6 million, down around 58.5% year over year.
Long-term debt was $ 2,186.2 million, up roughly 28.8%.
Outlook
Scotts Miracle-Gro reaffirmed outlook for earnings, sales and cash
flow for fiscal 2019. The company stated that it is encouraged with
the level of engagement from its largest retail partners as it
heads for the 2019 lawn and garden season. Factors like the
combination of strong retailer support, increased investment in
brands along with innovative product line makes the company
confident in its outlook for the season.
In November 2018, the company provided guidance for fiscal 2019.
Adjusted earnings per share (EPS) were projected in the band of
$4.10-$4.30. Sales are projected to grow 10-11%, considering
expected growth of 1-2% in the U.S. Consumer segment and the
balance from the Hawthorne segment.
Price Performance
Shares of Scotts Miracle-Gro have lost 20.8% in the past year
compared with the industry’s 0.6% decline.
Zacks Rank & Other Key Picks
Scotts Miracle-Gro currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the basic materials space include
Ingevity Corporation NGVT, Quaker Chemical Corporation KWR and
Israel Chemicals Ltd ICL. While Ingevity sports a Zacks Rank #1
(Strong Buy), both Quaker Chemical and Israel Chemicals carry a
Zacks Rank #2. You can see the complete list of
today’s Zacks #1 Rank stocks here.
Ingevity has an expected earnings growth rate of 21.5% for 2019.
The company’s shares have gained 28.4% in the past year.
Quaker Chemical has an expected earnings growth rate of 21.1% for
2019. Its shares have rallied 29.6% in a year’s time.
Israel Chemicals has an expected earnings growth rate of 5.4% for
2019. Its shares have rallied 39.4% in a year’s time.
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