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Scotts (SMG) Up 0.4% 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 0.4% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Scotts Miracle-Gro's Q1 Earnings and Sales Beat Estimates
Scotts Miracle-Gro incurred a loss of $64.7 million or $1.17 per share in the first quarter of fiscal 2023 (ending Dec 31, 2022), 29% wider than the loss of $50 million or 90 cents per share reported in the prior-year quarter.
Barring one-time items, the adjusted loss was $1.02 per share compared with a loss of 88 cents a year ago. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.40.
The company’s net sales in the first quarter were $526.6 million, which topped the Zacks Consensus Estimate of $503.5 million. Net sales decreased around 7% year over year. The top line declined primarily due to lower sales in the Hawthorne segment resulting from the weakness in the hydroponic industry.
Company-wide gross margin rate (as adjusted) was 18.2% compared with 21% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume loss at Hawthorne, increased commodity costs and reduced production volumes in the U.S. consumer business. These were partly offset by price increases and a favorable segment mix.
Segment Highlights
In the first quarter, net sales in the U.S. Consumer division were up 8% year over year to $369 million. The segment recorded a profit of $31.3 million, up 193%.
Net sales in the Hawthorne segment tumbled 31% year over year to $131.5 million in the reported quarter. The segment reported a loss of $16.2 million, 206% wider than the year-ago loss of $5.3 million.
Net sales in the other segment fell 21% year over year to $26.1 million. The segment reported a profit of $1.4 million, up 8%.
Financials
At the end of the first quarter, SMG had cash and cash equivalents of $25.6 million, up around 56.1% year over year. Long-term debt increased approximately 3.5% to $3,189.6 million.
Outlook
Moving ahead, the company anticipates a low single-digit percentage decline in net sales and gross margin rate for fiscal 2023. It expects its adjusted operating income to grow by a low single-digit percentage in fiscal 2023. SMG’s net sales for its Hawthorne segment are expected to decline 20% to 30%. It also sees low single-digit percentage year-over-year growth in adjusted EBITDA for fiscal 2023. SMG expects a free cash flow of $1 billion over the next two years.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -14.04% due to these changes.
VGM Scores
Currently, Scotts has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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. Notably, Scotts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Scotts (SMG) Up 0.4% 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 0.4% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Scotts Miracle-Gro's Q1 Earnings and Sales Beat Estimates
Scotts Miracle-Gro incurred a loss of $64.7 million or $1.17 per share in the first quarter of fiscal 2023 (ending Dec 31, 2022), 29% wider than the loss of $50 million or 90 cents per share reported in the prior-year quarter.
Barring one-time items, the adjusted loss was $1.02 per share compared with a loss of 88 cents a year ago. The figure was narrower than the Zacks Consensus Estimate of a loss of $1.40.
The company’s net sales in the first quarter were $526.6 million, which topped the Zacks Consensus Estimate of $503.5 million. Net sales decreased around 7% year over year. The top line declined primarily due to lower sales in the Hawthorne segment resulting from the weakness in the hydroponic industry.
Company-wide gross margin rate (as adjusted) was 18.2% compared with 21% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume loss at Hawthorne, increased commodity costs and reduced production volumes in the U.S. consumer business. These were partly offset by price increases and a favorable segment mix.
Segment Highlights
In the first quarter, net sales in the U.S. Consumer division were up 8% year over year to $369 million. The segment recorded a profit of $31.3 million, up 193%.
Net sales in the Hawthorne segment tumbled 31% year over year to $131.5 million in the reported quarter. The segment reported a loss of $16.2 million, 206% wider than the year-ago loss of $5.3 million.
Net sales in the other segment fell 21% year over year to $26.1 million. The segment reported a profit of $1.4 million, up 8%.
Financials
At the end of the first quarter, SMG had cash and cash equivalents of $25.6 million, up around 56.1% year over year. Long-term debt increased approximately 3.5% to $3,189.6 million.
Outlook
Moving ahead, the company anticipates a low single-digit percentage decline in net sales and gross margin rate for fiscal 2023. It expects its adjusted operating income to grow by a low single-digit percentage in fiscal 2023. SMG’s net sales for its Hawthorne segment are expected to decline 20% to 30%. It also sees low single-digit percentage year-over-year growth in adjusted EBITDA for fiscal 2023. SMG expects a free cash flow of $1 billion over the next two years.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -14.04% due to these changes.
VGM Scores
Currently, Scotts has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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. Notably, Scotts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.