The Scotts Miracle-Gro Company SMG reported net income from continuing operations of $204.3 million or $3.57 per share in third-quarter fiscal 2020 (ended Jun 27, 2020), up from $178 million or $3.15 per share in the year-ago quarter.
Barring one-time items, adjusted earnings per share (EPS) were $3.80, up 22.2% year over year. The figure beat the Zacks Consensus Estimate of $3.35.
Net sales rose 27.6% year over year to $1,492.7 million and beat the consensus mark of $1,323.6 million.
Company-wide gross margin rate (as adjusted) was 36.1% compared with 36.2% in the year-ago quarter.
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 fiscal third quarter, net sales in the U.S. Consumer division increased 21% year over year to $1,075.8 million. Profitability in the unit increased 14% year over year to $310.5 million.
Net sales in the Hawthorne segment rose 72% year over year to $302.9 million in the reported quarter, driven by strong demand in almost all categories. The segment’s profit surged 145% year over year to $41.1 million.
Net sales in the Other segment increased 9% year over year to $114 million. The segment’s profitability rose 9% year over year to $14.4 million in the quarter.
Balance Sheet
At the end of the fiscal third quarter, the company had cash and cash equivalents of $48.3 million, up 32.7% year over year. Long-term debt was $1,516 million, down 3% year over year.
Outlook
For fiscal 2020, the company revised its sales growth outlook.
In the U.S. Consumer unit, the company projects sales growth of 20-22% for the fiscal, up from 9-11% expected earlier. It now expects sales in the Hawthorne segment to rise 55-60% in fiscal 2020, up from 45-50% expected earlier.
Based on these assumptions, Scotts Miracle-Gro now projects adjusted EPS between $6.65 and $6.85 compared with earnings of $5.65-$5.85 expected earlier. Adjusted free cash flow is expected to be around $400 million, up from the earlier projection of roughly $350 million.
Price Performance
Shares of Scotts Miracle-Gro have surged 40.2% in the past year against the industry’s 27.1% decline.
Zacks Rank & Other Key Picks
Scotts Miracle-Gro currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the basic materials space include Equinox Gold Corp. EQX, B2Gold Corp BTG and Northern Dynasty Minerals Ltd. NAK, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Equinox Gold has an expected earnings growth rate of 255.2% for 2020. The company’s shares have surged 94.3% in the past year.
B2Gold has an expected earnings growth rate of 257.1% for 2020. Its shares have returned 108.4% in the past year.
Northern Dynasty has an expected earnings growth rate of 35.7% for 2020. The company’s shares have gained 98.2% in the past year.
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