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Why Is Scotts (SMG) Down 16.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Scotts Miracle-Gro (SMG - Free Report) . Shares have lost about 16.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Scotts due for a breakout? 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 drivers.
Scotts Miracle-Gro Tops Q1 Earnings and Sales Estimates
Scotts Miracle-Gro reported net income from continuing operations of $25.2 million or 43 cents per share in first-quarter fiscal 2021 (ended Jan 2, 2021) against a net loss of $71.3 million or $1.28 per share in the year-ago quarter.
The company has historically reported a loss during its first quarter thanks to the seasonal nature of the lawn and garden industry. The 2021 results signify the first time it has reported a first-quarter profit.
Barring one-time items, adjusted earnings per share (EPS) were 39 cents per share, up 134.8% year over year. The figure topped the Zacks Consensus Estimate of a loss of 73 cents.
Net sales surged 104.6% year over year to $748.6 million and beat the consensus mark of $616 million.
Company-wide gross margin rate (as adjusted) was 26.7% compared with 14.9% in the year-ago quarter.
These results are primarily driven by strong retailer support in the U.S. Consumer segment and continued momentum in the Hawthorne segment.
Segment Details
In the first quarter, net sales in the U.S. Consumer division increased 147% year over year to $408.2 million. The segment reported profits of $45.3 million against a loss of $40.1 million in the prior-year quarter.
Net sales in the Hawthorne segment rose 71% year over year to $309.4 million in the reported quarter. The segment’s profits skyrocketed 223% year over year to $40.4 million.
Net sales in the Other segment increased 58% year over year to $31 million. The segment reported no profit or loss in the quarter compared with a loss of $3.5 million in the prior-year quarter.
Balance Sheet
At the end of first quarter, the company had cash and cash equivalents of $21.5 million, down 21.5% year over year. Long-term debt was $1,979.8 million, up 0.5% year over year.
Outlook
The company expects sale growth of 1-6% in fiscal 2021 compared with 0-5% expected earlier. Sales guidance in the Hawthorne segment was raised to 20-30% from 15-20% expected previously. U.S. Consumer sales guidance has been reaffirmed at 0 to -5%.
The adjusted EPS guidance of $8.00-$8.40 is reaffirmed as well. The company stated that it now expects SG&A to drop 3-8% from 2020 levels, compared with the previous estimate of a 6-11% year-over-year decline.
The adjusted gross margin rate is now projected to decline 125-175 basis points (bps) year-over-year. This updated guidance for gross margin rate compares with the previously anticipated decline of 50 bps.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Scotts has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Scotts has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Scotts (SMG) Down 16.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Scotts Miracle-Gro (SMG - Free Report) . Shares have lost about 16.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Scotts due for a breakout? 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 drivers.
Scotts Miracle-Gro Tops Q1 Earnings and Sales Estimates
Scotts Miracle-Gro reported net income from continuing operations of $25.2 million or 43 cents per share in first-quarter fiscal 2021 (ended Jan 2, 2021) against a net loss of $71.3 million or $1.28 per share in the year-ago quarter.
The company has historically reported a loss during its first quarter thanks to the seasonal nature of the lawn and garden industry. The 2021 results signify the first time it has reported a first-quarter profit.
Barring one-time items, adjusted earnings per share (EPS) were 39 cents per share, up 134.8% year over year. The figure topped the Zacks Consensus Estimate of a loss of 73 cents.
Net sales surged 104.6% year over year to $748.6 million and beat the consensus mark of $616 million.
Company-wide gross margin rate (as adjusted) was 26.7% compared with 14.9% in the year-ago quarter.
These results are primarily driven by strong retailer support in the U.S. Consumer segment and continued momentum in the Hawthorne segment.
Segment Details
In the first quarter, net sales in the U.S. Consumer division increased 147% year over year to $408.2 million. The segment reported profits of $45.3 million against a loss of $40.1 million in the prior-year quarter.
Net sales in the Hawthorne segment rose 71% year over year to $309.4 million in the reported quarter. The segment’s profits skyrocketed 223% year over year to $40.4 million.
Net sales in the Other segment increased 58% year over year to $31 million. The segment reported no profit or loss in the quarter compared with a loss of $3.5 million in the prior-year quarter.
Balance Sheet
At the end of first quarter, the company had cash and cash equivalents of $21.5 million, down 21.5% year over year. Long-term debt was $1,979.8 million, up 0.5% year over year.
Outlook
The company expects sale growth of 1-6% in fiscal 2021 compared with 0-5% expected earlier. Sales guidance in the Hawthorne segment was raised to 20-30% from 15-20% expected previously. U.S. Consumer sales guidance has been reaffirmed at 0 to -5%.
The adjusted EPS guidance of $8.00-$8.40 is reaffirmed as well. The company stated that it now expects SG&A to drop 3-8% from 2020 levels, compared with the previous estimate of a 6-11% year-over-year decline.
The adjusted gross margin rate is now projected to decline 125-175 basis points (bps) year-over-year. This updated guidance for gross margin rate compares with the previously anticipated decline of 50 bps.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Scotts has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Scotts has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.