Scotts Miracle-Gro (SMG) Tops Q2 Earnings & Sales Estimates

The Scotts Miracle-Gro Company (NYSE:SMG) posted net earnings from continuing operations of $396.9 million or $7.10 per share in second-quarter fiscal 2019 (ended Mar 30, 2019), up from $152.7 million or $2.66 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $3.64 per share, up 26.4% year over year. The figure beat the Zacks Consensus Estimate of $3.42.

Net sales rose roughly 17.4% year over year to $1,189.9 million. The figure surpassed the consensus estimate of $1,160.7 million.

Company-wide gross margin rate declined to 39.7% from 40.4% in the year-ago quarter. Margins were affected by the Sunlight buyout and unfavorable product mix, partly offset by higher pricing.

Segment Details

In the fiscal second quarter, net sales in the U.S. Consumer division rose roughly 8% year over year to $993.5 million, primarily due to double-digit growth in consumer purchases. The segment’s profit went up 12% to $320 million.

Net sales in the Hawthorne segment surged around 245% to $144.1 million in the quarter, which was mainly driven by the acquisition of Sunlight Supply and volume growth in most categories. The segment reported profit of $10.3 million against net loss of $4.8 million a year ago.

Net sales in the Other segment, which comprises the company’s consumer lawn and garden business in regions other than the United States, rose 2% to $52.3 million. The segment’s profit soared 138% to $3.8 million.

Balance Sheet

At the end of the fiscal second quarter, Scotts Miracle-Gro had cash and cash equivalents of $37.5 million, up around 13.6% year over year. Long-term debt was $2,039.1 million, up roughly 5.2%.

Outlook

Scotts Miracle-Gro reaffirmed its guidance for fiscal 2019. The company also acknowledged that given a strong start in both U.S. Consumer and Hawthorne divisions, its actual sales growth may exceed original forecast. Adjusted earnings per share are projected in the band of $4.10-$4.30.

Price Performance

Shares of Scotts Miracle-Gro have gained 15.1% in the past year compared with the industry’s 0.9% rise.

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 Sandstorm Gold Ltd. (NYSE:SAND) , Flexible Solutions International Inc (NYSE:FSI) and Reliance Steel & Aluminum Co. (NYSE:RS) .

Sandstorm Gold has an expected earnings growth rate of 200% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 8.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2. Its shares have surged roughly 100% in the past year.

Reliance Steel has an expected earnings growth rate of 2.4% for the current year and carries a Zacks Rank #2. Its shares have moved up around 1.7% in the past year.

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