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Scotts (SMG) Up 9.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Scotts Miracle-Gro (SMG - Free Report) . Shares have added about 9.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Scotts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Scotts Miracle-Gro Misses Q4 Earnings and Sales Estimates
Scotts Miracle-Gro reported loss from continuing operations of $220.1 million or $3.97 per share in fourth-quarter fiscal 2022 (ended Sep 30, 2022) compared with a loss of $48.7 million or 87 cents per share in the year-ago quarter.
Barring one-time items, adjusted loss was $2.04 per share for the quarter. The figure was wider than the Zacks Consensus Estimate of a loss of $2.02.
Net sales fell around 33% year over year to $493.6 million and missed the consensus mark of $527.4 million. The company witnessed lower sales across its major segments in the quarter.
Company-wide gross margin rate (as adjusted) was 3.5% compared with 17.4% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume, increased commodity costs and unfavorable distribution costs. These were partly offset by price increases and favorable segment mix.
Segment Details
In the fiscal fourth quarter, net sales in the U.S. Consumer division were down 18% year over year to $302.1 million. The segment recorded a loss of $52.1 million, down 176% year over year.
Net sales in the Hawthorne segment tumbled 49% year over year to $168.5 million in the reported quarter. The segment reported a loss of $23.2 million, down 177% year over year.
Net sales in the Other segment fell 41% year over year to $23 million. The segment reported a loss of $2.5 million, down 4% year over year.
Fiscal 2022 Results
Loss from continuing operations (as reported) or full-year fiscal 2022 was $7.88 per share, compared with a profit of $9.03 per share a year ago. Revenues were $3.92 billion for the fiscal, down around 20% year over year.
Balance Sheet
At the end of the quarter, the company had cash and cash equivalents of $86.8 million, down around 64% year over year. Long-term debt was $2,826.2 million, up around 26% year over year.
Outlook
The company anticipates low single-digit percentage growth on a year-over-year basis in adjusted operating income in fiscal 2023. It also sees mid-single digit percentage year over year growth in adjusted EBITDA for the fiscal. SMG also expects free cash flow of $1 billion over the next two years.
Scotts Miracle-Gro, in August 2022, announced “Project Springboard”, aimed at boosting margins, improving cash flow and strengthening the balance sheet to provide a strong foundation for sustainable shareholder value creation. The first phase of this initiative achieved $100 million of annualized savings split between fiscal 2022 and fiscal 2023. The second phase of this initiative (Project Springboard 2.0) is expected to achieve an additional $85 million of cost reductions to be realized in fiscal 2023 and fiscal 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -8.38% due to these changes.
VGM Scores
At this time, Scotts has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Scotts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Scotts (SMG) Up 9.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Scotts Miracle-Gro (SMG - Free Report) . Shares have added about 9.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Scotts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Scotts Miracle-Gro Misses Q4 Earnings and Sales Estimates
Scotts Miracle-Gro reported loss from continuing operations of $220.1 million or $3.97 per share in fourth-quarter fiscal 2022 (ended Sep 30, 2022) compared with a loss of $48.7 million or 87 cents per share in the year-ago quarter.
Barring one-time items, adjusted loss was $2.04 per share for the quarter. The figure was wider than the Zacks Consensus Estimate of a loss of $2.02.
Net sales fell around 33% year over year to $493.6 million and missed the consensus mark of $527.4 million. The company witnessed lower sales across its major segments in the quarter.
Company-wide gross margin rate (as adjusted) was 3.5% compared with 17.4% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume, increased commodity costs and unfavorable distribution costs. These were partly offset by price increases and favorable segment mix.
Segment Details
In the fiscal fourth quarter, net sales in the U.S. Consumer division were down 18% year over year to $302.1 million. The segment recorded a loss of $52.1 million, down 176% year over year.
Net sales in the Hawthorne segment tumbled 49% year over year to $168.5 million in the reported quarter. The segment reported a loss of $23.2 million, down 177% year over year.
Net sales in the Other segment fell 41% year over year to $23 million. The segment reported a loss of $2.5 million, down 4% year over year.
Fiscal 2022 Results
Loss from continuing operations (as reported) or full-year fiscal 2022 was $7.88 per share, compared with a profit of $9.03 per share a year ago. Revenues were $3.92 billion for the fiscal, down around 20% year over year.
Balance Sheet
At the end of the quarter, the company had cash and cash equivalents of $86.8 million, down around 64% year over year. Long-term debt was $2,826.2 million, up around 26% year over year.
Outlook
The company anticipates low single-digit percentage growth on a year-over-year basis in adjusted operating income in fiscal 2023. It also sees mid-single digit percentage year over year growth in adjusted EBITDA for the fiscal. SMG also expects free cash flow of $1 billion over the next two years.
Scotts Miracle-Gro, in August 2022, announced “Project Springboard”, aimed at boosting margins, improving cash flow and strengthening the balance sheet to provide a strong foundation for sustainable shareholder value creation. The first phase of this initiative achieved $100 million of annualized savings split between fiscal 2022 and fiscal 2023. The second phase of this initiative (Project Springboard 2.0) is expected to achieve an additional $85 million of cost reductions to be realized in fiscal 2023 and fiscal 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -8.38% due to these changes.
VGM Scores
At this time, Scotts has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Scotts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.