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Scotts Miracle-Gro (SMG) Up 29% in 6 Months: Here's Why

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Shares of The Scotts Miracle-Gro Company (SMG - Free Report) have rallied 29.3% in the past six months compared with the industry’s 23.9% rise and the S&P 500’s 15.5% growth.

The company has a market cap of around $12 billion.

Let’s discuss the factors driving this Zacks Rank #3 (Hold) stock.

Positive outlook, strong demand in the U.S. Consumer unit and bright prospects in the Hawthorne business are major factors contributing to the company’s price performance.

The company’s adjusted earnings of $5.64 per share for second-quarter fiscal 2021 topped the Zacks Consensus Estimate of $5.51.

Net sales rallied 32.3% year over year to $1,828.8 million and beat the consensus mark of $1,739.5 million. Sales were driven by strong volume growth in the key segments.

In the U.S. Consumer unit, the company reaffirmed sales growth of 4-6% for the fiscal. The company raised its sales growth guidance in the Hawthorne segment. It now expects sales in the segment to rise 30-40% in fiscal 2021 compared with the previous guidance of 20-30%.

Further, Scotts Miracle-Gro projects adjusted earnings for fiscal 2021 between $8.60 and $9.00, suggesting an increase from $7.24 in fiscal 2020.

Earnings estimates for Scotts Miracle-Gro have also been going up over the past two months. The Zacks Consensus Estimate for fiscal 2021 has increased 4.1%. The favorable estimate revisions instill investors’ confidence in the stock.

The company should gain from the synergies of the Sunlight Supply acquisition. The buyout creates unique competitive advantages for the company’s Hawthorne division.

Scotts Miracle-Gro is also likely to benefit from the continued long-term prospects and cost savings opportunities associated with its Hawthorne division. The segment is gaining from strong growth across all product categories, especially hydroponic lighting in North America.

Scotts Miracle-Gro is also witnessing solid growth in its U.S. Consumer division, which has seen its sales climb 23% year over year in the most recent quarter.  The company is benefiting from strong retailer support in the segment.


Other Stocks to Consider

Some better-ranked stocks in the basic materials space are Dow Inc. (DOW - Free Report) , Nucor Corporation (NUE - Free Report) and Cabot Corporation (CBT - Free Report) .

Dow has a projected earnings growth rate of roughly 261.5% for the current year. The company’s shares have surged 79.3% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has an expected earnings growth rate of around 229.3% for the current year. The company’s shares have gained 149% in the past year. It currently sports a Zacks Rank #1.

Cabot has an expected earnings growth rate of around 126% for the current fiscal. The company’s shares have surged 74.4% in the past year. It currently flaunts a Zacks Rank #1.

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