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Scotts Miracle-Gro Up 24% in 3 Months: What's Driving It?

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Shares of The Scotts Miracle-Gro Company (SMG - Free Report) have gained 23.8% in the past three months against the industry’s 13.3% decline and the S&P 500’s 1.7% fall.


The company has a market cap of around $7.9 billion. Average volume of shares traded in the past three months was nearly 563.5K. The company’s long-term expected earnings per share (EPS) growth rate is pegged at 8.8%.

Let’s discuss the factors that are driving the stock.

Solid second-quarter fiscal 2020 results, upbeat fiscal 2020 view and healthy prospects of the Hawthorne business are contributing to the company’s share price appreciation.

Scotts Miracle-Gro’s adjusted EPS for second-quarter fiscal 2020 rose 23.6% year over year to $4.50. The figure topped the Zacks Consensus Estimate of $4.07.

For fiscal 2020, the company reaffirmed its sales growth outlook for the U.S. Consumer unit at the range of 1-3%. It expects sales in the Hawthorne segment to rise 30-35% in fiscal 2020. Based on these assumptions, it projects company-wide sales growth between 6% and 8% for the full year. The company expects adjusted EPS in the range of $4.95-$5.15.

The company is benefiting from synergies of the Sunlight Supply acquisition. The buyout has provided the company with a modern and cost-efficient supply chain in the hydroponic industry. In the fiscal second quarter, net sales in the Hawthorne segment rose 60% year over year on strong demand in almost all categories.

Scotts Miracle-Gro is also benefiting from its new line of organic plant food and growing media products — Miracle-Gro Performance Organics. Performance Organics generated sales of nearly $40 million in fiscal 2019 and contributed to a 6% rise in the consumer purchases of the company’s branded soils. The momentum is likely to continue in fiscal 2020.

Zacks Rank & Other Key Picks

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

Some other top-ranked stocks in the basic materials space are Agnico Eagle Mines Ltd. (AEM - Free Report) , Royal Gold, Inc. (RGLD - Free Report) and Newmont Corp. (NEM - Free Report) . While Agnico Eagle sports a Zacks Rank #1 (Strong Buy), Royal Gold and Newmont carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has an expected earnings growth rate of 75.3% for 2020. The company’s shares have surged 51.2% in the past year.

Royal Gold has an expected earnings growth rate of 67.6% for fiscal 2020. Its shares have returned 53.5% in the past year.

Newmont has an expected earnings growth rate of 82.6% for 2020. The company’s shares have surged 83% in the past year.

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