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SMG

Scotts Miracle-Gro NYSE:SMG Stock Report

Last Price

US$42.75

Market Cap

US$2.4b

7D

-14.4%

1Y

-70.9%

Updated

30 Sep, 2022

Data

Company Financials +
SMG fundamental analysis
Snowflake Score
Valuation3/6
Future Growth4/6
Past Performance0/6
Financial Health2/6
Dividends4/6

SMG Stock Overview

The Scotts Miracle-Gro Company engages in the manufacture, marketing, and sale of products for lawn, garden care, and indoor and hydroponic gardening in the United States and internationally.

The Scotts Miracle-Gro Company Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Scotts Miracle-Gro
Historical stock prices
Current Share PriceUS$42.75
52 Week HighUS$180.43
52 Week LowUS$42.68
Beta1.29
1 Month Change-36.15%
3 Month Change-46.68%
1 Year Change-70.95%
3 Year Change-58.91%
5 Year Change-56.24%
Change since IPO284.27%

Recent News & Updates

Aug 15

Scotts Miracle-Gro: Deep Value And Takeover Thoughts

Scotts Miracle-Gro is in a very tough spot as the stock is down 50% year-to-date. Management has admitted that mistakes were made given the steep decline in sales and weak margins. I believe that SMG offers long-term value but that reshaping the company is important. Given the circumstances, I'm not ruling out an acquisition. Introduction I've had some very good trades and investment ideas in the past few years. However, I've also had some bad ones. Scotts Miracle-Gro (SMG) is one of the bad ones. In 2021, I wrote a bullish article. Since then, the stock is down roughly 50%. It's down 30% since my most recent article in April. I'm not saying this to roast myself but because we're dealing with an interesting development here. First of all, I do not believe that my assessment of the company's value was wrong. SMG does bring a lot of value to the table as I will explain in this article. However, the market doesn't trust the company as it is simply not reporting the growth rates that the market expected the company to be capable of. Given the valuation, the company characteristics, and market distrust, I believe that the company isn't just a value play, but also a real takeover target. In this article, I will share my thoughts on recent developments and discuss the value SMG brings to the table. So, let's dive into it! There's Value, But No Trust With a market cap of $4.5 billion, SMG is a rather large player in the agricultural input industry. The company is officially operating in the basic materials sector, because of its core business. The company produces and sells a wide variety of products for lawn and garden care and has exclusive deals with companies like Monsanto to sell consumer Roundup-branded products. According to the company: [...] we are the leading manufacturer and marketer of branded consumer lawn and garden products in North America. Our key consumer lawn and garden brands include Scotts® and Turf Builder® lawn fertilizer and grass seed products; Miracle-Gro® soil, plant food and insecticide, LiquaFeed® plant food and Osmocote®1 gardening and landscape products; and Ortho®, Home Defense® and Tomcat® branded insect control, weed control and rodent control products. We are the exclusive agent of the Monsanto Company, a subsidiary of Bayer AG ("Monsanto"), for the marketing and distribution of certain of Monsanto's consumer Roundup®2 branded products within the United States and certain other specified countries. In other words, I would almost put the company in the consumer staples sector given that it sells anti-cyclical consumer products. Moreover, the company has a Hawthorne segment, which makes the company the leading manufacturer, marketer, and distributor of lighting, nutrients, growing media, growing environments, and related hardware products for indoor and hydroponic gardening. What this means is that the company is a heavyweight in the marijuana industry. In this case, the company is a supplier of the supplies mentioned above, which gives the company a good position in a highly competitive relationship between growers. On a full-year basis, the company generates 65% of its sales in the US consumer segment, followed by 29% in its Hawthorne segment. MarketScreener Moreover, the two consumer giants Lowe's (LOW) and Home Depot (HD) accounted for 39% of fiscal 2021 net sales. While this comes with the risks of losing a major customer, it does provide stability as "shelf space" in these two megastores provides top-tier consumer exposure. Besides that, I do not expect that either LOW or HD will drop SMG as a supplier. With that said, the company has reported steady growth, which is expected to continue. In FY2016, the company did $2.8 billion in sales. That number is expected to be $4.3 billion in 2024. That's not organic as the company spent close to $900 million on acquisitions during this period. While the pandemic provided the company with a strong boost as people were sitting at home working on projects, revenue is now expected to grow moderately again. TIKR.com Using Seeking Alpha's data, we see that growth is moderate. Over the past 10 years, the average annual compounded revenue growth was 4%. EBITDA grew by 5.1% thanks to improving margins. Seeking Alpha The issue is that both margins and growth have come down. The recently-released earnings are a good example of that. In 3Q22 (fiscal quarter), the company did $1.19 billion in revenue. That's $40 million lower than expected and 26.1% lower compared to the prior-year quarter. As reported by Seeking Alpha: The company lowered its full-year sales guidance in the U.S. Consumer segment due to lower-than-expected replenishment orders from retail partners. The company now expects sales to decline 8 to 9 percent. The company also expects further SG&A favorability and is now guiding full-year SG&A down 15 percent. As a result of these changes, the full-year adjusted EPS outlook is now expected to be $4.00 to $4.20 vs. consensus of $4.72. While consumer sales were down 14%, Hawthorne sales were down 63%, causing net income to fall from a $225.9 million profit to a $443.9 million loss. Note that Hawthorne saw 73% lower volumes as pricing offset some weakness. Scotts Miracle-Gro According to Chairman and CEO Jim Hagedorn: [...] especially with Hawthorne, we misread the market which drove investment decisions that I'd reverse if I could but I can't. What I can do and will do is focus on the proactive steps we can take to get this business back to an acceptable level of profitability. CEO Hagedorn had three takeaways that I want to include in this article. First, the company asks shareholders to not give up as the company is aware of challenges and working on solutions. First, is confidence that we understand the challenges in front of us and are moving with urgency. And while we've been forced to make dozens of tough decisions in a compressed time frame, including a headcount reduction of hundreds of people, we're also protecting our competitive advantages and securing the leadership pipeline we need for the future. This includes focusing on strong business fundamentals. Second is a belief in the underlying and undeniable strength of our U.S. consumer franchise. It is critical for shareholders to look beyond the financial performance of this business in the second half of the year. The fundamentals are still there. The consumers remain engaged and the future remains bright. And, finally, the company's confidence that it can improve margins. And third is an understanding of why we're confident we can restore the business to our historical margins, generate significant cash flow and recapture the financial flexibility we need to drive growth and enhance value. The company did invest too much into Hawthorne and probably at elevated prices. While I do not doubt that Hawthorne brings tremendous value to the table, the timing was off. Moreover, and this is not related to the company's own decisions, retailers are reducing inventory. Consumer sentiment has fallen off a cliff and prices have gone through the roof. That's toxic for any consumer-focused company. Even if it's about gardening-related products. Because companies like Lowe's and Home Depot are reducing inventory, SMG ended up with too much inventory, pressuring margins. Total retail inventories of SMG products were down 12%. SMG expects that number to increase a bit more due to inventory management. However, the company sees strong demand for its products. While consumers are cutting back, it's mainly on garden furniture, BBQ grills, and other products. Soil, fertilizers, and related continue to do well. Hence, SMG expects that retail inventory will be significantly lower going into spring, which is likely to fuel orders. With that in mind, as bad as the quarter was, the market didn't sell off to new lows. While SMG shares are down 50% year-to-date and roughly 67% below their all-time high, the stock is up 3.2% over the past four weeks. FINVIZ We're at a point where the value is good. SMG is trading at 11.5x FY2023E EBITDA, which I believe will break $600 million. That's based on a $6.9 billion enterprise value consisting of the $4.5 billion market cap, $2.3 billion in expected 2023 net debt, and roughly $100 million in pension-related liabilities. The valuation is now higher compared to four months ago as sell-side analysts do not believe that the company can do $900 million in EBITDA. Now, the company is lucky if it can do $600 million in EBITDA as volumes are simply too bad. Yet, even under these circumstances, that's too cheap. Historically speaking, SMG has traded close to 13x NTM (next twelve months) EBITDA.

Aug 06
Scotts Miracle-Gro (NYSE:SMG) Has Announced A Dividend Of $0.66

Scotts Miracle-Gro (NYSE:SMG) Has Announced A Dividend Of $0.66

The Scotts Miracle-Gro Company ( NYSE:SMG ) will pay a dividend of $0.66 on the 9th of September. Based on this...

Shareholder Returns

SMGUS ChemicalsUS Market
7D-14.4%-1.2%-2.5%
1Y-70.9%-15.4%-23.2%

Return vs Industry: SMG underperformed the US Chemicals industry which returned -13.5% over the past year.

Return vs Market: SMG underperformed the US Market which returned -21.5% over the past year.

Price Volatility

Is SMG's price volatile compared to industry and market?
SMG volatility
SMG Average Weekly Movement6.6%
Chemicals Industry Average Movement6.4%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: SMG is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 7% a week.

Volatility Over Time: SMG's weekly volatility (7%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
18687,300Jim Hagedornhttps://scottsmiraclegro.com

The Scotts Miracle-Gro Company engages in the manufacture, marketing, and sale of products for lawn, garden care, and indoor and hydroponic gardening in the United States and internationally. The company operates through three segments: U.S. Consumer, Hawthorne, and Other.

The Scotts Miracle-Gro Company Fundamentals Summary

How do Scotts Miracle-Gro's earnings and revenue compare to its market cap?
SMG fundamental statistics
Market CapUS$2.37b
Earnings (TTM)-US$266.20m
Revenue (TTM)US$4.17b

0.6x

P/S Ratio

-8.9x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
SMG income statement (TTM)
RevenueUS$4.17b
Cost of RevenueUS$3.02b
Gross ProfitUS$1.14b
Other ExpensesUS$1.41b
Earnings-US$266.20m

Last Reported Earnings

Jul 02, 2022

Next Earnings Date

Nov 02, 2022

Earnings per share (EPS)-4.80
Gross Margin27.43%
Net Profit Margin-6.39%
Debt/Equity Ratio824.8%

How did SMG perform over the long term?

See historical performance and comparison

Dividends

6.2%

Current Dividend Yield

-55%

Payout Ratio