Scotts Miracle-Gro Company (SMG) AI Stock Analysis

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Scotts Miracle-Gro Company

(NYSE:SMG)

50Neutral

Scotts Miracle-Gro Company has a mixed performance with financial challenges including high leverage and negative profitability. However, the company is executing strategic initiatives to improve its financial position, as evidenced by positive sentiment in the recent earnings call. The stock's technical indicators suggest bearish momentum, although it is nearing oversold territory. Despite valuation concerns due to a negative P/E ratio, the dividend yield provides some investor appeal.

Positive Factors

Financial Performance

Management reiterated its full-year core U.S. consumer guidance for sales growth as well as companywide gross margin expansion and EBITDA.

Investment Opportunity

Scotts Miracle-Gro trades at a historical low, creating an attractive entry point for investors focusing on its market position and financial plans.

Market Position

Scotts Miracle-Gro is seen as a strong consumer franchise with a significant market share of approximately 50% in the domestic market.

Negative Factors

Earnings Performance

Earnings quality was mixed with sales below expectations.

Financial Leverage

Scotts Miracle-Gro's trading multiple is penalized by the company’s high level of financial leverage and uncertainty around its cannabis-exposed businesses.

Market Sentiment

Shares have declined by over 40% since reaching a peak, despite the broader market being down only 7%.

Scotts Miracle-Gro Company (SMG) vs. S&P 500 (SPY)

Market Cap

$3.13B

Dividend Yield4.95%

Average Volume (3M)1.68M

Price to Earnings (P/E)109.8

Beta (1Y)0.92

Revenue Growth0.75%

EPS GrowthN/A

CountryUS

Employees5,300

SectorBasic Materials

Sector Strength59

IndustryAgricultural Inputs

Share Statistics

EPS (TTM)0.50

Shares Outstanding57,472,700

10 Day Avg. Volume2,015,432

30 Day Avg. Volume1,680,855

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap2.16

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit7.94

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$63.20

Price Target Upside15.96% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering7

Scotts Miracle-Gro Company Business Overview & Revenue Model

Company DescriptionThe Scotts Miracle-Gro Company (SMG) is a leading provider in the lawn and garden care industry, primarily serving the consumer market in North America. The company operates through three main segments: U.S. Consumer, Hawthorne, and Other. It offers a wide range of products including lawn fertilizers, grass seed products, spreaders, outdoor cleaners, and pest and weed control solutions. Scotts Miracle-Gro is renowned for its well-established brands such as Scotts, Miracle-Gro, and Ortho, and also engages in the hydroponic products market through its Hawthorne Gardening subsidiary, which focuses on indoor and urban gardening solutions.

How the Company Makes MoneyScotts Miracle-Gro generates revenue through the sale of its lawn and garden care products primarily to retail customers including home improvement centers, mass merchandisers, warehouse clubs, large hardware chains, independent hardware stores, nurseries, garden centers, and food and drug stores. The U.S. Consumer segment is its largest revenue stream, driven by the sale of fertilizers, grass seeds, and pest control products. The Hawthorne segment contributes to its revenue by offering hydroponic products and solutions to the indoor and urban gardening markets, catering to both hobbyists and commercial growers. The company also benefits from strategic partnerships and licensing agreements that enhance its product offerings and market reach. Seasonal demand, brand strength, and innovation in product development significantly impact its earnings.

Scotts Miracle-Gro Company Financial Statement Overview

Summary

Scotts Miracle-Gro Company is facing significant financial challenges with declining revenue, negative profitability, and high leverage. Despite improvements in operational efficiency indicated by EBIT margins, the negative equity and potential liquidity issues highlight the need for strategic financial adjustments to stabilize and improve its financial health.

Income Statement

Neutral

The company experienced a decline in revenue from the previous year, alongside negative net income margins, indicating profitability challenges. However, there is a slight improvement in gross profit and EBIT margins in the TTM, suggesting some operational enhancement.

Balance Sheet

Negative

The balance sheet reveals a negative stockholders' equity and high debt levels, indicating potential financial instability and leverage risks. The equity ratio is negative, suggesting that liabilities exceed assets.

Cash Flow

Neutral

The company shows a strong operating cash flow, which is significantly higher than net income, reflecting good cash-generating ability. However, the decline in free cash flow compared to previous periods suggests potential cash management issues.

Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
3.55B	3.55B	3.92B	4.92B	4.13B
	Gross Profit
850.50M	657.30M	872.90M	1.47B	1.35B
	EBIT
208.80M	-174.40M	253.10M	723.00M	585.20M
	EBITDA
215.80M	-174.40M	-336.90M	845.80M	697.60M
	Net Income Common Stockholders
-34.90M	-380.10M	-437.50M	512.50M	387.40M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
71.60M	31.90M	86.80M	244.10M	16.60M
	Total Assets
2.87B	3.41B	4.30B	4.80B	3.38B
	Total Debt
2.52B	2.61B	2.97B	2.29B	1.52B
	Net Debt
2.45B	2.58B	2.88B	2.05B	1.50B
	Total Liabilities
3.26B	3.68B	4.15B	3.79B	2.68B
	Stockholders Equity
-390.60M	-267.30M	147.70M	1.01B	702.90M
Cash Flow		Free Cash Flow
583.50M	438.20M	-242.50M	164.60M	495.30M
	Operating Cash Flow
667.50M	531.00M	-129.00M	271.50M	558.00M
	Investing Cash Flow
-100.40M	-65.70M	-283.20M	-538.60M	46.90M
	Financing Cash Flow
-527.90M	-520.10M	255.30M	494.00M	-607.10M

Scotts Miracle-Gro Company Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price54.50

Price Trends

50DMA

56.23

Negative

100DMA

62.45

Negative

200DMA

68.78

Negative

Market Momentum

MACD

-0.85

Negative

RSI

51.62

Neutral

STOCH

69.12

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SMG, the sentiment is Neutral. The current price of 54.5 is above the 20-day moving average (MA) of 52.05, below the 50-day MA of 56.23, and below the 200-day MA of 68.78, indicating a neutral trend. The MACD of -0.85 indicates Negative momentum. The RSI at 51.62 is Neutral, neither overbought nor oversold. The STOCH value of 69.12 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SMG.

Scotts Miracle-Gro Company Risk Analysis

Scotts Miracle-Gro Company disclosed 41 risk factors in its most recent earnings report. Scotts Miracle-Gro Company reported the most risks in the “Production” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Scotts Miracle-Gro Company Peers Comparison

Overall Rating

UnderperformOutperform

Sector (49)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CF	77 Outperform	$13.42B	11.96	22.76%	2.51%	-10.48%	-13.78%
ICL	76 Outperform	$8.76B	21.52	7.08%	2.80%	-8.59%	-37.13%
MOS	64 Neutral	$9.68B	55.94	1.47%	2.79%	-18.79%	-84.24%
FMC	60 Neutral	$4.72B	13.93	8.78%	6.03%	1.45%	-70.85%
RKDA	53 Neutral	$4.81M	―	-60.76%	―	-6.20%	64.07%
SMG	50 Neutral	$3.13B	109.77	4.98%	4.95%	0.75%	―
Sector *	49 Neutral	$1.95B	-1.37	-21.43%	3.74%	0.84%	-29.84%

* Basic Materials Sector Average

Performance Comparison

SMG

Scotts Miracle-Gro Company

54.50

-14.22

-20.69%

Cf Industries Holdings

80.60

7.93

10.91%

FMC

37.78

-20.52

-35.20%

MOS

Mosaic Co

30.51

2.39

8.50%

ICL

Icl

6.79

2.23

48.90%

RKDA

Arcadia Biosciences

3.52

1.52

76.00%

Scotts Miracle-Gro Company Earnings Call Summary

Earnings Call Date:Apr 30, 2025

(Q2-2025)

% Change Since: 1.79%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Positive

The earnings call highlighted significant progress in gross margin recovery, market share gains, and reduction in leverage. While net sales and Hawthorne's performance have declined, the overall sentiment remains positive due to strong consumer takeaway, effective cost reduction strategies, and reaffirmed guidance.

Q2-2025 Updates

Positive Updates

Reaffirmed Full Year Guidance

The company reaffirmed its full-year guidance of $570 million to $590 million of EBITDA and no expected impact on margins or pricing from tariffs in fiscal '25.

Strong Consumer Takeaway and Market Share Gains

Delivered double-digit increases in consumer takeaway, gained market share, and maintained strong momentum despite macroeconomic volatility.

Substantial Gross Margin Recovery

Achieved nearly 500 basis point recovery in gross margin and a $36 million EBITDA increase in the first half.

Positive Developments in Lawn Business

POS units for the lawn business increased by 4%, with Turf Builder Halts up 67%. Strategies to promote multi-bag purchases and regular feedings are showing initial success.

Successful Transformation and Cost Reduction

On track for more than $75 million in supply chain cost reductions this year, with a larger goal of $150 million by fiscal '27.

Hawthorne's Positive EBITDA Performance

Hawthorne delivered two consecutive EBITDA-positive quarters, indicating improvements in the cannabis sector's balance.

Reduction in Leverage

Reduced leverage to 4.41 times net debt to adjusted EBITDA, comfortably below the covenant maximum of 5.25.

Negative Updates

Decline in Net Sales

Total company net sales were down 7% in the quarter, with U.S. consumer net sales down 5% and Hawthorne net sales down 51% due to continued hydroponic market softness.

Hawthorne Sales Decline

Hawthorne's net sales declined significantly due to strategic exit from low-margin third-party distribution and ongoing challenges in the cannabis sector.

Increased SG&A Expenses

SG&A expenses increased by 5% for the quarter and 7% year-to-date due to higher performance-based incentive accruals and investments in brands and technology.

Company Guidance

In the recent earnings call, Scotts Miracle-Gro reaffirmed its full-year guidance, projecting EBITDA between $570 million and $590 million, despite a 7% decline in net sales for the second quarter compared to the previous year. The company reported a significant 12.1% increase in POS units, driven by strong performance in the garden and mulch segments, which were up 16% and 46%, respectively. Gross margin improved by nearly 500 basis points through the first half of the fiscal year, attributed to lower material costs and improved product mix. The company achieved a $36 million increase in adjusted EBITDA in the first half and reduced leverage to 4.41 times, with plans to reach a gross margin rate above 35% by fiscal year-end. Despite ongoing challenges in the Hawthorne segment, the company remains confident in its financial position, bolstered by a strategic focus on cost savings and promotional activities.

Scotts Miracle-Gro Company Corporate Events

Executive/Board ChangesShareholder Meetings

Scotts Miracle-Gro Announces Board Changes and Shareholder Decisions

Neutral

Jan 31, 2025

On January 27, 2025, Tom Kelly resigned from The Scotts Miracle-Gro Company’s Board of Directors, effective January 31, after nearly 20 years of service, without any disagreements with the company. Subsequently, on January 31, 2025, Nick Miaritis, a chief client officer at VaynerMedia, was appointed to the Board, enhancing the company’s focus on expanding its consumer marketing capabilities. The company’s shareholders, at the annual meeting, elected new directors, approved executive compensation, ratified Deloitte & Touche LLP as the independent auditor, and amended the stock purchase plan.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.