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Scotts (SMG) Down 0.7% Since Last Earnings Report: Can It Rebound?
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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 0.7% 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’s Q2 Earnings Beat Estimates, Sales Lag
Scotts Miracle-Gro reported a second-quarter fiscal 2023 (ending Apr 1, 2023) profit of $109.4 million or $1.94 per share, 60.4% lower than the profit of $276.5 million or $4.94 per share in the prior-year quarter.
Barring one-time items, the adjusted earnings were $3.78 per share compared with $5.03 a year ago, topping the Zacks Consensus Estimate of $3.20.
The company’s net sales in the second quarter were $1,531.5 million, which lagged the Zacks Consensus Estimate of $1,617.6 million. Net sales decreased around 8.8% 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 34.7% compared with 35.4% in the year-ago quarter. The adjusted gross margin rate declined due to higher commodities, unfavorable conversion and fixed cost leverage, largely brought on by volume loss at Hawthorne and reduced production volumes in the U.S. consumer business.
Segment Highlights
In the second quarter, net sales in the U.S. Consumer division were down 2% year over year to $1,357.4 million. The segment recorded a profit of $397.4 million, down 7% year over year.
Net sales in the Hawthorne segment tumbled 54% year over year to $92.7 million in the reported quarter. The segment reported a loss of $16.8 million. The figure was 609% lower than the year-ago profit of $3.3 million.
Net sales in the other segment fell 15% year over year to $81.4 million. The segment reported a profit of $14.6 million, up 39%.
Financials
At the end of the second quarter, The company had cash and cash equivalents of $25 million, up around 46.2% year over year. Long-term debt decreased roughly 6.3% to $3,138 million.
Outlook
Moving ahead, the company anticipates a near 100 basis points decline in gross margin rate for fiscal 2023. It expects its adjusted operating income to decrease by a middle single-digit percentage in fiscal 2023. It also sees a low single-digit percentage decline in adjusted EBITDA for fiscal 2023. The company expects a free cash flow of $1 billion over the next two years.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -23.42% due to these changes.
VGM Scores
Currently, Scotts has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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. It's no surprise Scotts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Scotts (SMG) Down 0.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Scotts Miracle-Gro (SMG - Free Report) . Shares have lost about 0.7% 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’s Q2 Earnings Beat Estimates, Sales Lag
Scotts Miracle-Gro reported a second-quarter fiscal 2023 (ending Apr 1, 2023) profit of $109.4 million or $1.94 per share, 60.4% lower than the profit of $276.5 million or $4.94 per share in the prior-year quarter.
Barring one-time items, the adjusted earnings were $3.78 per share compared with $5.03 a year ago, topping the Zacks Consensus Estimate of $3.20.
The company’s net sales in the second quarter were $1,531.5 million, which lagged the Zacks Consensus Estimate of $1,617.6 million. Net sales decreased around 8.8% 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 34.7% compared with 35.4% in the year-ago quarter. The adjusted gross margin rate declined due to higher commodities, unfavorable conversion and fixed cost leverage, largely brought on by volume loss at Hawthorne and reduced production volumes in the U.S. consumer business.
Segment Highlights
In the second quarter, net sales in the U.S. Consumer division were down 2% year over year to $1,357.4 million. The segment recorded a profit of $397.4 million, down 7% year over year.
Net sales in the Hawthorne segment tumbled 54% year over year to $92.7 million in the reported quarter. The segment reported a loss of $16.8 million. The figure was 609% lower than the year-ago profit of $3.3 million.
Net sales in the other segment fell 15% year over year to $81.4 million. The segment reported a profit of $14.6 million, up 39%.
Financials
At the end of the second quarter, The company had cash and cash equivalents of $25 million, up around 46.2% year over year. Long-term debt decreased roughly 6.3% to $3,138 million.
Outlook
Moving ahead, the company anticipates a near 100 basis points decline in gross margin rate for fiscal 2023. It expects its adjusted operating income to decrease by a middle single-digit percentage in fiscal 2023. It also sees a low single-digit percentage decline in adjusted EBITDA for fiscal 2023. The company expects a free cash flow of $1 billion over the next two years.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -23.42% due to these changes.
VGM Scores
Currently, Scotts has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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. It's no surprise Scotts has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.