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Bull of the Day: The Scotts Miracle-Gro Company (SMG)
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Scotts Miracle-Gro (SMG - Free Report) shares have surged 20% in 2020, with its lawn care products seen as immune from the coronavirus economic downturn. SMG has also grown through its exposure to the growing legal marijuana business in North America.
Spring Projects & Marijuana Growth
Scotts Miracle-Gro is a consumer lawn and garden products powerhouse. As its name suggests, it operates under both Scotts and Miracle-Gro brands, as well as Ortho. Plus, SMG owns indoor and hydroponic leader The Hawthorne Gardening Company. This helps Scotts Miracle-Gro gain huge exposure to the growing marijuana industry, as well as indoor farming in general—which both have potential to boom over the next several decades.
Last quarter, SMG’s U.S. consumer segment sales popped 8%, while Hawthorne revenue jumped 41% to help lift overall Q1 fiscal 2020 revenue by 23%. “We continue to see outstanding performance across all product categories of our Hawthorne business in the United States, with double-digit growth in long-standing markets such as California and Colorado and even stronger performance in emerging markets like Michigan and Florida,” CEO Jim Hagedorn said in prepared remarks.
Scotts Miracle-Gro’s chief executive also said that “Hawthorne continues to distance itself from its largest competitors.” And investors should remember that the legalized marijuana business is still in its early days, which should give Hawthorne plenty of runway to expand as more states legalize.
Meanwhile, Scotts Miracle-Gro’s more consumer-facing gardening and lawn care business is in the midst of its busy spring and summer seasons. Importantly, the coronavirus could actually boost SMG sales as more people are stuck at home and doing home improvement projects. Let’s also not forget that marijuana sales have grown during the coronavirus as well.
Other Fundamentals
The nearby chart shows that SMG stock has crushed its industry over the last five years, up roughly 98%. More recently, shares of Scotts Miracle-Gro have jumped 50% in the past 12 months and 50% since the market’s March 23 lows, which has it trading at new highs. This impressive recent performance helps SMG crush stay-at-home standouts such as Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) and blow by the S&P 500’s 25% climb.
Despite its climb, Scotts Miracle-Gro is trading below its three-year highs and not too far off its median in terms of forward 12-month sales estimates at 2.0X. This marks a discount against the S&P 500’s 3.2X and Home Depot’s (HD - Free Report) 2.1X.
On April 27, the firm announced that its next quarterly dividend of $0.58 per share, will be payable on June 10, to shareholders of record as of May 27. SMG’s current yield rests at 1.82% to top its industry’s 0.86% average. More importantly, the yield isn’t artificially inflated since the stock is trading near new highs and its payout ratio sits at a stable 49%.
Outlook
The Marysville, Ohio-based company is set to release its Q2 fiscal 2020 financial results on Wednesday, May 6. Our current Zacks estimates call for its Q2 sales to jump 16.8% to reach $1.39 billion. Overall, SMG’s full-year fiscal 2020 revenue is projected to pop 7%, with FY21 set to climb another 3.3%. These sales estimates would come on top of last year’s 18% revenue growth and easily top 2018’s roughly 1% expansion.
Scotts Miracle-Gro’s adjusted Q2 earnings are expected to jump 11% to hit $4.04 a share. Peeking further ahead, its full-year EPS figures are projected to climb by 16% and 10%, respectively in FY20 and FY21.
Bottom Line
Scotts Miracle-Gro’s positive earnings revisions activity for Q2, fiscal 2020, and 2021 helps it earn a Zacks Rank #1 (Strong Buy) at the moment. SGM is also part of an industry that rests in the top 25% of our more than 250 Zacks industries.
Some investors might be worried about a near-term pullback if SMG fails to impress Wall Street next week. But Scotts Miracle-Gro stock appears to be a solid and safe longer-term play that might also be one of the best non-pure play investments in the growing marijuana industry.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Bull of the Day: The Scotts Miracle-Gro Company (SMG)
Scotts Miracle-Gro (SMG - Free Report) shares have surged 20% in 2020, with its lawn care products seen as immune from the coronavirus economic downturn. SMG has also grown through its exposure to the growing legal marijuana business in North America.
Spring Projects & Marijuana Growth
Scotts Miracle-Gro is a consumer lawn and garden products powerhouse. As its name suggests, it operates under both Scotts and Miracle-Gro brands, as well as Ortho. Plus, SMG owns indoor and hydroponic leader The Hawthorne Gardening Company. This helps Scotts Miracle-Gro gain huge exposure to the growing marijuana industry, as well as indoor farming in general—which both have potential to boom over the next several decades.
Last quarter, SMG’s U.S. consumer segment sales popped 8%, while Hawthorne revenue jumped 41% to help lift overall Q1 fiscal 2020 revenue by 23%. “We continue to see outstanding performance across all product categories of our Hawthorne business in the United States, with double-digit growth in long-standing markets such as California and Colorado and even stronger performance in emerging markets like Michigan and Florida,” CEO Jim Hagedorn said in prepared remarks.
Scotts Miracle-Gro’s chief executive also said that “Hawthorne continues to distance itself from its largest competitors.” And investors should remember that the legalized marijuana business is still in its early days, which should give Hawthorne plenty of runway to expand as more states legalize.
Meanwhile, Scotts Miracle-Gro’s more consumer-facing gardening and lawn care business is in the midst of its busy spring and summer seasons. Importantly, the coronavirus could actually boost SMG sales as more people are stuck at home and doing home improvement projects. Let’s also not forget that marijuana sales have grown during the coronavirus as well.
Other Fundamentals
The nearby chart shows that SMG stock has crushed its industry over the last five years, up roughly 98%. More recently, shares of Scotts Miracle-Gro have jumped 50% in the past 12 months and 50% since the market’s March 23 lows, which has it trading at new highs. This impressive recent performance helps SMG crush stay-at-home standouts such as Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) and blow by the S&P 500’s 25% climb.
Despite its climb, Scotts Miracle-Gro is trading below its three-year highs and not too far off its median in terms of forward 12-month sales estimates at 2.0X. This marks a discount against the S&P 500’s 3.2X and Home Depot’s (HD - Free Report) 2.1X.
On April 27, the firm announced that its next quarterly dividend of $0.58 per share, will be payable on June 10, to shareholders of record as of May 27. SMG’s current yield rests at 1.82% to top its industry’s 0.86% average. More importantly, the yield isn’t artificially inflated since the stock is trading near new highs and its payout ratio sits at a stable 49%.
Outlook
The Marysville, Ohio-based company is set to release its Q2 fiscal 2020 financial results on Wednesday, May 6. Our current Zacks estimates call for its Q2 sales to jump 16.8% to reach $1.39 billion. Overall, SMG’s full-year fiscal 2020 revenue is projected to pop 7%, with FY21 set to climb another 3.3%. These sales estimates would come on top of last year’s 18% revenue growth and easily top 2018’s roughly 1% expansion.
Scotts Miracle-Gro’s adjusted Q2 earnings are expected to jump 11% to hit $4.04 a share. Peeking further ahead, its full-year EPS figures are projected to climb by 16% and 10%, respectively in FY20 and FY21.
Bottom Line
Scotts Miracle-Gro’s positive earnings revisions activity for Q2, fiscal 2020, and 2021 helps it earn a Zacks Rank #1 (Strong Buy) at the moment. SGM is also part of an industry that rests in the top 25% of our more than 250 Zacks industries.
Some investors might be worried about a near-term pullback if SMG fails to impress Wall Street next week. But Scotts Miracle-Gro stock appears to be a solid and safe longer-term play that might also be one of the best non-pure play investments in the growing marijuana industry.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>