Consumer Products

Scotts Miracle-Gro Gets Sky-High

Scotts Miracle-Gro Co. (NYSE: SMG) reported third-quarter fiscal 2020 results before markets opened Wednesday. The gardening company posted adjusted diluted earnings per share (EPS) of $3.80 on revenues of $1.5 billion. In the same period a year ago, the company reported EPS of $3.11 on revenues of $1.2 billion. Third-quarter results also compare to consensus estimates for EPS of $3.37 on revenues of $1.31 billion.

While the results were strong, the company is getting even more love for its announced $5 per share special dividend and a dividend increase of 7%, from $0.58 per share quarterly to $0.62 per share. Both dividends are payable on September 10 to shareholders of record as of August 27.

Scotts also said its board had approved a special one-time bonus payment to nearly 3,000 employees who are not in the company’s bonus plans and will “enhance” payments to nearly 1,500 who do participate in the plans. Scotts also will double its contributions to charity.

While the U.S. consumer segment saw revenues rise by 21% to $1.1 billion, the Hawthorne segment posted revenue growth of 72%, or $302.9 million. That segment includes hydroponic and other indoor growing products that have become a strong seller among legal cannabis growers. The Hawthorne segment posted a 145% increase in profit to $41.1 million. The consumer segment posted profits of $310.5 million, up 14% year over year.

Consolidated operating margin was 35.3% on a GAAP basis (36.1% non-GAAP), down from 36.2% last year. The company attributed the decline to the timing of a payment from Bayer, whose Roundup herbicide is marketed by Scotts.

In its outlook for the full 2020 fiscal year, Scotts raised sales growth guidance to 26% to 28% companywide. In the consumer segment, sales growth is expected to rise by 20% to 22%, while the Hawthorne segment is forecast to post growth of 55% to 60% for the full year. Previous estimates called for growth of 9% to 11% in consumer sales and 45% to 50% in the Hawthorne segment. Analysts had estimate year-over-year sales growth overall at 16%.

Adjusted EPS guidance for the year was raised from a range of $5.65 to $5.85 to a new range of $6.65 to $6.85.

Analysts had forecast fourth-quarter revenue at $604 million and a per-share loss of $0.09, while for the full-year EPS was projected at $5.79 on sales of $3.7 billion.

Investors have driven shares to an all-time high of $167.44 just after the opening bell. The 52-week low is $76.50 and the consensus price target on the stock is $153.67.

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