Scotts Miracle-Gro Co. (SMG) manufactures and sells consumer lawn, garden care, and pest control products under the Scotts, Miracle-Gro, and Ortho brands. Founded in 1868 as O.M. Scott & Sons, the Marysville, Ohio-based company went public in 1992 with an initial offering of $19.00 a share. It merged with Miracle-Gro in 1995, which brought about its name change, and continued to acquire companies over the years, most recently in 2020 with the purchase of the hydroponics producer AeroGrow International Inc.

Some stock analysts group SMG into the cannabis stocks sector because the company’s products have been used in the growth of marijuana plants. Earlier this month, Hawthorne Canada Ltd., a subsidiary of SMG’s Hawthorne Gardening Co. division, joined The Flowr Corp. in unveiling an indoor cannabis research and development facility in British Columbia. In this country, SMG devotes a page on the website to its support of legalized marijuana for both medical and recreational use. 

“The products we design and sell have one thing in common – they help people express themselves by gardening and growing plants,” SMG said in defense of its position on legalization, adding that its “experience growing an expansive, thriving business enterprise, and the company’s history of collaborating with government entities and other stakeholders to address difficult regulatory issues can provide invaluable insight and expertise to officials grappling with the challenges inherent in building comprehensive regulation for the cannabis industry.”

Here’s how our proprietary POWR Ratings system evaluates WOW:

Trade Grade: A

SMG is trading at $220.20, slightly below its 52-week high of $229.58 and far removed from its 52-week low of $76.50. After tumbling with the rest of the market in the pandemic-induced fallout of March, the stock has steadily regained its strength and took a healthy leap upward in November when its FY2020 data was released.

Buy & Hold Grade:

The stock’s proximity to its 52-week high is a key factor that our Buy & Hold Grade considers, and SMG is within sight of that high mark. This performance has been buoyed by the company’s FY 2020 data, which reported record-breaking company-wide sales of $4.13 billion in the year ending Sept. 30. 2020, a 31% year-over-year leap from $3.16 billion one year earlier.

For Q4 2020, SMG’s company-wide sales increased 79% to $890.3 million. Q4 is historically a period of seasonal loss for SMG, but this marked its first profitable fourth quarter in 14 years. It also reported income from continuing operations of $4.2 million, or $0.07 per diluted share, compared with a loss of $55.5 million, or $0.99 per diluted share, a year earlier.

“We currently expect to deliver adjusted earnings per share in a range of $8.00 to $8.40 in fiscal 2021, which would mark yet another year of double-digit earnings growth,” said Chairman and CEO Jim Hagedorn. 

Following the release of this data, the SMG board approved the payment of a cash dividend of $0.62 per share.

Peer Grade: A

SMG is ranked #3 out of 66 stocks in the Home Improvement & Goods category, with only Lowe’s Cos. (LOW) and Sherwin-Williams Co. (SHW) ranked higher.

Industry Rank: B

The Home Improvement & Goods category ranks #50 out of 123 stock categories and has an average POWR Rating of “B.”

Overall POWR Rating: A

This might be the ultimate no-brainer: SMG earns an “A” (Strong Buy) POWR Rating based on its exemplary financial performance.

Bottom Line

The SMG stock is as verdant as the lawns and fruitful as the plants encouraged by the company’s product lines. The only surprise here is wondering what the company will do for an encore in its FY 2021 numbers. 

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SMG shares were trading at $219.32 per share on Friday morning, down $4.63 (-2.07%). Year-to-date, SMG has gained 10.13%, versus a 0.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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