Scotts Miracle-Gro (SMG) Tops Q2 Earnings & Sales Estimates

The Scotts Miracle-Gro Company SMG posted net earnings from continuing operations of $396.9 million or $7.10 per share in second-quarter fiscal 2019 (ended Mar 30, 2019), up from $152.7 million or $2.66 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $3.64 per share, up 26.4% year over year. The figure beat the Zacks Consensus Estimate of $3.42.

Net sales rose roughly 17.4% year over year to $1,189.9 million. The figure surpassed the consensus estimate of $1,160.7 million.

Company-wide gross margin rate declined to 39.7% from 40.4% in the year-ago quarter. Margins were affected by the Sunlight buyout and unfavorable product mix, partly offset by higher pricing.

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 Details

In the fiscal second quarter, net sales in the U.S. Consumer division rose roughly 8% year over year to $993.5 million, primarily due to double-digit growth in consumer purchases. The segment’s profit went up 12% to $320 million.

Net sales in the Hawthorne segment surged around 245% to $144.1 million in the quarter, which was mainly driven by the acquisition of Sunlight Supply and volume growth in most categories. The segment reported profit of $10.3 million against net loss of $4.8 million a year ago.

Net sales in the Other segment, which comprises the company’s consumer lawn and garden business in regions other than the United States, rose 2% to $52.3 million. The segment’s profit soared 138% to $3.8 million.

Balance Sheet

At the end of the fiscal second quarter, Scotts Miracle-Gro had cash and cash equivalents of $37.5 million, up around 13.6% year over year. Long-term debt was $2,039.1 million, up roughly 5.2%.

Outlook

Scotts Miracle-Gro reaffirmed its guidance for fiscal 2019. The company also acknowledged that given a strong start in both U.S. Consumer and Hawthorne divisions, its actual sales growth may exceed original forecast. Adjusted earnings per share are projected in the band of $4.10-$4.30.  

Price Performance

Shares of Scotts Miracle-Gro have gained 15.1% in the past year compared with the industry’s 0.9% rise.

Zacks Rank & Other Key Picks

Scotts Miracle-Gro currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are Sandstorm Gold Ltd. SAND, Flexible Solutions International Inc FSI and Reliance Steel & Aluminum Co. RS.

Sandstorm Gold has an expected earnings growth rate of 200% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 8.2% in the past year.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2. Its shares have surged roughly 100% in the past year.

Reliance Steel has an expected earnings growth rate of 2.4% for the current year and carries a Zacks Rank #2. Its shares have moved up around 1.7% in the past year.

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