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Scotts Miracle-Gro (SMG) Q3 Earnings Beat Estimates, Sales Miss

·4 min read

The Scotts Miracle-Gro Company SMG reported loss from continuing operations of $443.9 million or $8.01 per share in third-quarter fiscal 2022 (ended Jul 2, 2022) compared with a profit of $229.8 million or $4.00 per share in the year-ago quarter.

Barring one-time items, the adjusted earnings were $1.98 per share, down from $3.98 a year ago. The figure topped the Zacks Consensus Estimate of $1.70.

Net sales fell around 26% year over year to $1,186.1 million and missed the consensus mark of $1,199.8 million. The company witnessed lower sales across its major segments in the quarter. It saw lower-than-expected sales in the U.S. Consumer segment and sustained pressure on sales in the Hawthorne unit due to oversupply issues in the cannabis industry.

Company-wide gross margin rate (as adjusted) was 25.5% compared with 30.8% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume, increased commodity costs and unfavorable distribution costs. These were partly offset by price increases and favorable segment mix.

 

The Scotts MiracleGro Company Price, Consensus and EPS Surprise

 

The Scotts MiracleGro Company Price, Consensus and EPS Surprise
The Scotts MiracleGro Company Price, Consensus and EPS Surprise

The Scotts MiracleGro Company price-consensus-eps-surprise-chart | The Scotts MiracleGro Company Quote

 

Segment Details

In the third quarter, net sales in the U.S. Consumer division were down 14% year over year to $904.5 million. The segment delivered a profit of $181.1 million, down 32% year over year.

Net sales in the Hawthorne segment tumbled 63% year over year to $154.5 million in the reported quarter. The segment reported a profit of $4.1 million, down 92% year over year.

Net sales in the Other segment fell 10% year over year to $127.1 million. The segment reported a profit of $10.9 million, down 59% year over year.

Balance Sheet

At the end of the quarter, the company had cash and cash equivalents of $27.8 million, down around 52% year over year. Long-term debt was $3,155.6 million, up around 48% year over year.

Outlook

The company anticipates a similar or greater decline in sales in the U.S. Consumer division in the fiscal fourth quarter. For the full year, it now expects sales to decline 8-9%. It also expects full-year adjusted earnings per share to be $4.00-$4.20.

Scotts Miracle-Gro also announced “Project Springboard”, aimed at boosting margins, improving cash flow and strengthening the balance sheet to provide a strong foundation for sustainable shareholder value creation.

Price Performance

Shares of Scotts Miracle-Gro have declined 49.2% in the past year against a 48.7% rise of the industry.

 

Zacks Investment Research
Zacks Investment Research


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Zacks Rank & Key Picks

Scotts Miracle-Gro currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks worth considering in the basic materials space include Cabot Corporation CBT, Sociedad Quimica y Minera de Chile S.A. SQM and Albemarle Corporation ALB.

Cabot, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 0.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 35% over a year.

Sociedad has a projected earnings growth rate of 513.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 57.8% upward in the past 60 days.

Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 28.2%. SQM has rallied roughly 88% in a year. The company sports a Zacks Rank #1.

Albemarle has a projected earnings growth rate of 231.4% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 3.6% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 6% in a year and currently carries a Zacks Rank #1.


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