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

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The Scotts Miracle-Gro Company (SMG - Free Report) stock looks promising at the moment. The company’s shares rallied around 16% in the past year.

We are positive regarding the company’s prospects and believe that the time is right to add the stock to your portfolio as it looks promising and is poised to carry the momentum ahead.

Let's see what makes the company a compelling investment option at the moment.

An Outperformer

Scotts Miracle-Gro has significantly outperformed the industry it belongs to in the past year. The company’s shares have gained 15.7% against the 38.8% decline of the industry. The company has also outpaced the S&P 500’s decline of 3.3% over the same period.

Solid Q1 Results & Upbeat Prospects

Scotts Miracle-Gro 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.

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.

Sunlight Supply Buyout to Boost Hawthorne

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.

Net sales in the Hawthorne segment surged 95% in fiscal 2019, partly driven by the favorable impact of Sunlight Supply buyout. Net sales in the Hawthorne segment climbed 41% year over year in fiscal first quarter on the back of strong demand in almost all categories of indoor growing equipment and supplies. The company also believes that sales in the Hawthorne unit will likely increase by around 20% in second-quarter fiscal 2020.

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Estimates for fiscal 2020 for Scotts Miracle-Gro have moved up in the past two months. Over this period, the Zacks Consensus Estimate for the year inched up 1.8%. The Zacks Consensus Estimate for earnings for 2020 is currently pegged at $5.11 per share, which suggests year-over-year growth of 14.3%.


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 - Free Report) , Novagold Resources Inc. (NG - Free Report) and Impala Platinum Holdings Limited (IMPUY - 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 an expected earnings growth rate of 353.7% for fiscal 2020. The company’s shares have surged 57.2% in the past year.

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. Its shares have returned 54.4% in the past year.    

Impala Platinum has an expected earnings growth rate of 424.1% for fiscal 2020. The company’s shares have rallied 30% in the past year.

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