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Why Scotts Miracle-Gro is Worth Adding to Your Portfolio Now

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The Scotts Miracle-Gro Company’s (SMG - Free Report) stock looks promising at the moment. The company’s shares have surged around 82.9% year to date.

Scotts Miracle-Gro currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

We are optimistic about the company’s prospects and believe that the time is right for you to add the stock as it looks promising and is poised to sustain the momentum.

Let's see what makes Scotts Miracle-Gro a compelling investment option at the moment.

An Outperformer

Scotts Miracle-Gro has significantly outperformed the industry it belongs to over a year. The company’s shares have rallied 47.9% against 14.3% decline recorded by the industry. The company has also outpaced the S&P 500’s decline of 0.4% for the same period.



 

Solid Q3 Results

The company posted net earnings from continuing operations of $201.7 million or $3.15 per share in third-quarter fiscal 2019 (ended Jun 29, 2019), up from $82.9 million or $2.23 in the year-ago quarter.

Adjusted earnings per share (EPS) rose 16.5% year over year to $3.11. The figure surpassed the Zacks Consensus Estimate of $2.71.

Net sales rose around 18% year over year to $1,170.3 million, which beat the consensus mark of $1,066 million.

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Estimates for fiscal 2019 for Scotts Miracle-Gro have moved up 5.9% in the past three months. The Zacks Consensus Estimate for earnings for the fiscal is currently pegged at $4.50 per share, which indicates an expected year-over-year rise of around 21.3%.

 

Upbeat View

Scotts Miracle-Gro raised its guidance for fiscal 2019 for the second time.

It now expects adjusted EPS in the band $4.35-$4.50 compared with $4.20-$4.40 expected earlier. Per the company, revised guidance for company-wide sales growth of 16-17% assumes that sales in the Hawthorne unit will increase around 90% year over year to $650 million in fiscal 2019. The U.S. Consumer segment is expected to grow 6-7%.

Acquisitions and Hawthorne to Drive Growth

Scotts Miracle-Gro will gain from the synergies of the Sunlight Supply acquisition. The buyout provides it with modern and cost-efficient supply chain in the hydroponic industry that will benefit its retail customers and end consumers.

Moreover, the integration of Sunlight Supply is on track. The company continues to expect roughly $30 million in synergies from the transaction by the end of fiscal 2019.

Scotts Miracle-Gro is witnessing strong growth in the Hawthorne segment. Sales in the segment’s surged nearly 138% in the fiscal third quarter, mainly driven by the acquisition of Sunlight Supply. Scotts Miracle-Gro is expected to benefit from the continued long-term prospects and cost-saving opportunities associated with the Hawthorne division.  

Other Stocks to Consider

Some other top-ranked stocks in the basic materials space are Kinross Gold Corporation (KGC - Free Report) , Alamos Gold Inc (AGI - Free Report) and Arconic Inc (ARNC - Free Report) , all sporting a Zacks Rank #1.  

Kinross has an expected earnings growth rate of 150% for 2019. The company’s shares have surged 63.4% in the past year.

Alamos Gold has projected earnings growth rate of 300% for the current year. The company’s shares have rallied 55.6% in a year’s time.

Arconic has an estimated earnings growth rate of 47.1% for the current year. Its shares have moved up 16.1% in the past year.

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