Jefferies has adjusted its price target for Scotts Miracle-Gro (SMG, Financial), lowering it from $69 to $62, while maintaining a Buy rating on the stock. Despite the downgrade, the company's shares have dipped as investors scrutinize the extent of list price reinvestment at retail outlets aimed at boosting the brand's sales momentum. This strategy leads some to doubt Scotts' capacity to raise prices in FY26, especially after recent promotional activities.
Nonetheless, according to the analyst, the company's sell-through levels remain robust, market share growth is evident, and overall guidance appears largely unchanged.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for The Scotts Miracle Gro Co (SMG, Financial) is $70.14 with a high estimate of $82.00 and a low estimate of $55.00. The average target implies an upside of 43.22% from the current price of $48.98. More detailed estimate data can be found on the The Scotts Miracle Gro Co (SMG) Forecast page.
Based on the consensus recommendation from 10 brokerage firms, The Scotts Miracle Gro Co's (SMG, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for The Scotts Miracle Gro Co (SMG, Financial) in one year is $65.21, suggesting a upside of 33.15% from the current price of $48.975. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the The Scotts Miracle Gro Co (SMG) Summary page.
SMG Key Business Developments
Release Date: January 29, 2025
- Revenue: $417 million, up from $410 million.
- US Consumer Sales: Increased 11% to $341 million from $307 million.
- Hawthorne Sales: Declined 35% to $52 million from $80 million.
- Gross Margin (GAAP): 22.7%, up from 15.2% in the prior year.
- Gross Margin (Non-GAAP): 24%, up from 13.7% in the prior year.
- SG&A Expenses: $125 million, up 9% from $115 million.
- Adjusted EBITDA: Income of $3.8 million versus a loss of $25.8 million last year.
- Net Loss (GAAP): $69.5 million or $1.21 per share, improved from a loss of $80.5 million or $1.42 per share.
- Net Loss (Non-GAAP): $51 million or $0.89 per share, improved from a loss of $82.2 million or $1.45 per share.
- Free Cash Flow Usage: $475 million, reflecting normal seasonal build of working capital.
- Total Debt Reduction: Lower by $337 million compared to prior year.
- Leverage Ratio: 4.52x net debt to adjusted EBITDA, below the covenant maximum of 5.5x.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Scotts Miracle Gro Co (SMG, Financial) reported strong first-quarter results, exceeding expectations and setting a positive tone for fiscal 2025.
- The company is investing an additional $40 million into brand support and innovation, with a focus on advertising and expanding demographic reach.
- SMG achieved over 750 basis points of improvement in both GAAP and non-GAAP adjusted gross margin rates, driven by lower material costs and improved product mix.
- The company is on track to achieve $75 million in supply chain cost savings for fiscal 2025, contributing to a near 30% gross margin rate target for the full year.
- SMG is focusing on channel expansion, particularly in the e-commerce space, to capture a broader consumer base and drive growth.
Negative Points
- Hawthorne sales declined 35% due to a strategic shift to exit low-margin third-party distribution, impacting overall company sales.
- Despite strong first-quarter results, SMG is maintaining its guidance due to the first quarter representing less than 10% of total POS.
- The company faces challenges in the lawn fertilizer business due to climate change and pricing issues, impacting unit volume.
- There is a need for significant cost savings and transformation efforts to achieve long-term financial goals, which could pose risks if not executed effectively.
- The separation of Hawthorne from SMG is still in progress, with logistical challenges and the need for bank approvals potentially delaying the process.
