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Scotts Miracle-Gro (SMG) Q4 Earnings Miss, Sales Top Estimates

The Scotts Miracle-Gro Company SMG posted net loss from continuing operations of $55.5 million or 99 cents per share in fourth-quarter fiscal 2019 (ended Sep 30, 2019), narrower than loss of $130.6 million or $2.36 per share in the year-ago quarter.

Barring one-time items, adjusted loss per share was 91 cents, wider than loss of 75 cents a year ago. The figure was also wider than the Zacks Consensus Estimate of loss of 87 cents per share.

Net sales rose around 15% year over year to $497.7 million. The figure surpassed the consensus mark of $451 million.

Company-wide gross margin rate rose to 18% from 17% in the year-ago quarter.

Fiscal 2019 Results

Adjusted net income for fiscal 2019 rose roughly 19% year over year to $251.8 million or $4.47 per share, while net sales rose roughly 18% to $3,156 million.

The Scotts Miracle-Gro Company Price, Consensus and EPS Surprise

Segment Details

In the fiscal fourth quarter, net sales in the U.S. Consumer division rose roughly 4% year over year to $261.6 million. The segment generated loss of $20.7 million against net profit of $5.3 million in the year-ago quarter.

Net sales in the Hawthorne segment rose nearly 38% to $210 million in the quarter, which was primarily driven by strong demand across the United States. The segment’s profit grew to $21.9 million from $0.5 million a year ago.

Net sales in the Other segment fell 10% to $26.1 million. The segment generated loss of $2.6 million against net profit of $0.7 million in the year-ago quarter.

Balance Sheet

At the end of fiscal 2019, the company had cash and cash equivalents of $18.8 million, down 44.5% year over year. Long-term debt was $1,523.5 million, down 19.2%.

Outlook

Scotts Miracle-Gro expects company-wide sales growth of 4-6% for fiscal 2020. Moreover, the company anticipates Hawthorne’s sales to grow 12-15% and U.S. Consumer sales to rise 1-3%.

It expects adjusted earnings per share of $4.95-$5.15 for fiscal 2020.

Free cash flow is expected to be $300 million.

Price Performance

Shares of the company have rallied 32.6% in the past year against the industry’s 21.6% decline.

 

Zacks Rank & Other Stocks to Consider

Scotts Miracle-Gro currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the basic materials space are Kinross Gold Corporation KGC, Franco-Nevada Corporation FNV and Agnico Eagle Mines Limited AEM, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an expected earnings growth rate of 210% for 2019. The company’s shares have surged 80.9% in the past year.

Franco-Nevada has a projected earnings growth rate of 39.3% for 2019. The company’s shares have rallied 48.2% in a year.

Agnico Eagle has an estimated earnings growth rate of 168.6% for the current year. Its shares have moved up 67.6% in the past year.

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