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What Makes Scotts Miracle-Gro (SMG) a Solid Pick Right Now

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The Scotts Miracle-Gro Company (SMG - Free Report) stock looks promising at the moment. The company’s shares have rallied more than 50% year to date.

We are positive regarding the company’s prospects and believe that the time is right to add the stock to your portfolio. The stock looks promising and is poised to carry the momentum ahead.

Let's see what makes this Zacks Rank #1 (Strong Buy) stock an appropriate investment option at the moment.

An Outperformer

Scotts Miracle-Gro has significantly outperformed the industry it belongs to in the past year. The company’s shares have surged 47.6% against 9.8% decline of the industry. The company also outpaced the S&P 500’s rise of 17.5% over the same time frame.

Strong Q3 Results

Scotts Miracle-Gro’s adjusted earnings per share (EPS) rose 22% year over year in third-quarter fiscal 2020 (ended Jun 27, 2020) to $3.80. The figure beat the Zacks Consensus Estimate of $3.35.  

Also, net sales rose 27.6% year over year to $1,492.7 million and beat the consensus mark of $1,323.6 million.

Upbeat View

For fiscal 2020, the company revised its sales growth outlook.

In the U.S. Consumer unit, the company projects sales growth of 20-22% for the fiscal, up from 9-11% expected earlier. It now expects sales in the Hawthorne segment to rise 55-60% in fiscal 2020, up from the previous expectation of 45-50%.

Based on these assumptions, Scotts Miracle-Gro now projects adjusted EPS between $6.65 and $6.85 compared with earnings of $5.65-$5.85 expected earlier. Adjusted free cash flow is expected to be around $400 million, up from the earlier projection of nearly $350 million.

Positive Estimate Revisions

Earnings estimate revisions have the great impact on stock prices. The Zacks Consensus Estimate for Scotts Miracle-Gro’s fiscal fourth-quarter earnings moved up 37.4% in the past month. Further, the company’s earnings for fiscal 2020 is currently pegged at $6.46 per share, which suggests year-over-year growth of 44.5%.

VGM Score

Scotts Miracle-Gro currently has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 or 2 (Buy) offer the best investment opportunities to investors. Thus, the company is an appropriate investment option at the moment.

Other Key Picks

Some other top-ranked stocks in the basic materials space include Northern Dynasty Minerals, Ltd. (NAK - Free Report) , Eldorado Gold Corporation (EGO - Free Report) and Yamana Gold Inc. , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northern Dynasty Minerals has an expected earnings growth rate of 35.7% for 2020. The company’s shares have surged 122.3% in the past year.

Eldorado Gold has an expected earnings growth rate of 2,225% for 2020. Its shares have returned 27.8% in the past year.

Yamana has an expected earnings growth rate of 76.9% for 2020. The company’s shares have surged 74.8% in the past year.

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