Shares of The Scotts Miracle-Gro Company SMG have rallied 32.9% in the past three months compared with the industry’s 5.8% rise and the S&P 500’s 18% gain.
The company has a market cap of around $7.5 billion. Average volume of shares traded in the past three months was nearly 475.4K. The company has an expected earnings per share (EPS) growth rate of 29.5% for fiscal 2020.
Let’s analyze the factors that are driving the stock.
Driving Factors
Upbeat views and bright prospects in the Hawthorne business are contributing to the company’s price performance.
In June, the company raised its fiscal 2020 guidance based on higher demand in the U.S. Consumer and Hawthorne segments.
For fiscal 2020 (ending Sep 30, 2020), Scotts Miracle-Gro projects company-wide sales growth in the range of 16-18% compared with 6-8% growth expected earlier. The upbeat view is supported by stronger growth in the U.S. Consumer unit, where the company now expects 9-11% growth compared with the previous expectation of 1-3% increase. In the Hawthorne segment, the company now expects sales growth of 45-50% for fiscal 2020 compared with 30-35% expected earlier.
Based on the above assumptions, the company now projects adjusted earnings per share in the range $5.65-$5.85 compared with $4.95-$5.15 expected earlier.
The company is also benefiting from synergies of the Sunlight Supply acquisition. The buyout has provided Scotts Miracle-Gro with a modern and cost-efficient supply chain in the hydroponic industry. The acquisition is expected to contribute to growth in adjusted EPS and total sales in fiscal 2020.
Earnings estimate revisions also make a great impact on stock prices. Notably, the Zacks Consensus Estimate for fiscal third-quarter earnings for Scotts Miracle-Gro has moved up 14.3% in the past month.
The Scotts MiracleGro Company Price and Consensus
The Scotts MiracleGro Company price-consensus-chart | The Scotts MiracleGro Company Quote
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 are Sandstorm Gold Ltd SAND, Harmony Gold Mining Company Limited HMY and AngloGold Ashanti Limited AU, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sandstorm Gold has an expected earnings growth rate of 55.6% for 2020. The company’s shares have surged 76.3% in the past year.
Harmony Gold has an expected earnings growth rate of 264.3% for fiscal 2020. Its shares have returned 90.7% in the past year.
AngloGold has an expected earnings growth rate of 109.9% for 2020. The company’s shares have surged 58.3% in the past year.
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