Scotts Miracle-Gro: Stifel Maintains Hold, PT Down to $70 from $71

Scotts Miracle-Gro: Stifel Maintains Hold, PT Down to $70 from $71

Scotts Miracle-Gro (NYSE: SMG), a leading manufacturer and marketer of consumer lawn and garden products, has seen its stock downgraded by Stifel Nicolaus. The investment firm has maintained a Hold rating on the company but has adjusted its price target down to $70 from $71 [2]. This move follows the company's recent earnings report for the fiscal third quarter (Q3 FY2025), which revealed mixed results.

Scotts Miracle-Gro reported non-GAAP diluted earnings per share (EPS) of $2.59 for Q3 FY2025, beating analyst estimates by $0.33. However, revenue declined slightly by 1% to $1.19 billion, falling short of both the prior year's $1.20 billion and the analyst estimate of $1.226.93 billion [1]. Despite the revenue dip, the company's non-GAAP adjusted gross margin rate improved to 32.1%, driven by cost control and supply chain initiatives.

The U.S. Consumer segment, which accounts for the majority of the company's results, saw a 1% increase in net sales. However, the Hawthorne segment, focused on hydroponics and indoor growing, continued to struggle, with net sales declining 51% in Q2 FY2025 and 54% in Q3 FY2025 [1]. The company remains on track to divest this segment, with plans to take advantage of up to $100 million in tax benefits in future periods.

Stifel's downgrade reflects a cautious approach to the company's prospects, given the heavy seasonality of the lawn and garden business and the potential softness in future quarters. Investors should watch for the company's push to boost organic product sales, continued cost-saving efforts, and the impact of promotions on both unit sales and pricing. Successful divestiture of the Hawthorne segment will also be important for margin and balance sheet progress.

References:
[1] https://www.aol.com/finance/scotts-miracle-gro-smg-q3-072915793.html
[2] https://www.marketscreener.com/news/earnings-flash-smg-the-scotts-miracle-gro-company-reports-fiscal-q3-revenue-1-19b-vs-factset-es-ce7c5fdfda8dfe26