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Scotts Miracle-Gro Hits New 52-Week High: What's Driving It?

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Shares of The Scotts Miracle-Gro Company SMG scaled a fresh 52-week high of $125.69 on Mar 4, before closing the session at $125.25.

The company has a market cap of around $6.5 billion. Average volume of shares traded in the past three months is 394.5K. It has a long-term earnings growth rate of 9.9%.

The stock has surged 51.9% in the past year against the industry’s 21.7% decline.

Let’s delve into the factors driving the rally.

Factors Driving Growth

Better-than-expected fiscal first-quarter results, bright prospects and new share repurchase program are among the factors driving the rally.

The company reported adjusted loss per share of $1.12 in first-quarter fiscal 2020 (ended Dec 28, 2019), which was narrower than a loss of $1.39 in the year-ago quarter. The figure was also narrower than the Zacks Consensus Estimate of a loss of $1.24.

Net sales rose 23% year over year to $365.8 million in the quarter, which beat the consensus mark of $347.7 million.

Scotts Miracle-Gro witnessed strong momentum in the U.S. Consumer unit in fiscal 2019, which also continued into fiscal 2020. Moreover, the company continues to see outstanding performance across all product categories in the Hawthorne business in the United States.

The company is upbeat on achieving its fiscal 2020 guidance. Scotts Miracle-Gro expects company-wide sales growth in the range of 4-6% for fiscal 2020. It continues to expect adjusted earnings per share in the band of $4.95-$5.15 for fiscal 2020.

Scotts Miracle-Gro is benefiting from the synergies of the Sunlight Supply acquisition. The buyout provides the company with modern and cost-efficient supply chain in the hydroponic industry. The company also believes that sales in the Hawthorne unit will likely increase by around 20% in second-quarter fiscal 2020.

In February, the company also announced that its board has approved a new share repurchase program of up to $750 million over the next three years.

Moreover, earnings estimate revisions make the greatest impact on stock prices. Earnings estimates for Scotts Miracle-Gro for fiscal second quarter and fiscal 2020 have moved up in the past month. Over this period, the Zacks Consensus Estimate for earnings per share moved up 1.1% to $3.76 for the fiscal second quarter, while the same for fiscal 2020 moved up 1.2% over the same time frame to $5.11.


Zacks Rank & Other Key Picks

Scotts Miracle-Gro currently carries a Zacks Rank #2 (Buy).

Few other top-ranked stocks in the basic materials space are Daqo New Energy Corp DQ, Sibanye Gold Limited SBSW and Impala Platinum Holdings Limited IMPUY, 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 an expected long-term earnings growth rate of 29%. The company’s shares have surged 80.3% in the past year.

Sibanye has an expected long-term earnings growth rate of 20.4%. Its shares have returned 123.6% in the past year.    

Impala Platinum has an expected long-term earnings growth rate of 32.9%. The company’s shares have surged 113.7% in the past year.

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