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Scotts Miracle-Gro (SMG) Shares Up 56% in A Year: Here's Why

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Shares of The Scotts Miracle-Gro Company (SMG - Free Report) have rallied 55.7% in the past year. The stock has also outperformed the industry’s decline of 11.4% over the same time frame.



The company has a market cap of around $5.9 billion. Average volume of shares traded in the past three months was nearly 370.2K. The company also has long-term expected earnings per share (EPS) growth rate of 9.9%.

Let’s discuss the factors that contributed favorably to the stock’s price appreciation.

Key Driving Factors

Upbeat fiscal 2020 outlook and bright prospects of the Hawthorne unit have been contributing to the company’s shares.

In November 2019, Scotts Miracle-Gro stated that it expects company-wide sales growth of 4-6% for fiscal 2020. Moreover, the company anticipates Hawthorne’s sales to grow 12-15% and U.S. Consumer sales to rise 1-3%. The company expects adjusted EPS in the range of $4.95-$5.15 for fiscal 2020, which indicates a rise from $4.47 recorded in fiscal 2019.

Scotts Miracle-Gro is gaining from the synergies of the Sunlight Supply acquisition. The buyout provides the company with modern and cost-efficient supply chain in the hydroponic industry. Moreover, net sales in the Hawthorne segment surged 95% in fiscal 2019, partly driven by the impact of the Sunlight Supply buyout. The acquisition is expected to keep driving Hawthorne’s sales in fiscal 2020.

Also, the company’s new line of organic plant food and growing media products — Miracle-Gro Performance Organics — provides additional upside. Notably, Performance Organics generated sales of nearly $40 million in fiscal 2019. It also led to a 6% improvement in the consumer purchases of the company’s branded soils. The company expects the momentum to continue in fiscal 2020.

Zacks Rank & Key Picks

Scotts Miracle-Gro currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp (DQ - Free Report) , Pan American Silver Corp (PAAS - Free Report) and Commercial Metals Company (CMC - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Daqo New Energy has projected earnings growth rate of 294.7% for 2020. The company’s shares have skyrocketed 102.4% in the past year.

Pan American Silver has an estimated earnings growth rate of 38.1% for 2020. Its shares have returned 48.7% in the past year.    

Commercial Metals has an expected earnings growth rate of 15.4% for fiscal 2020. The company’s shares have rallied 44.2% in the past year.

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