On Tuesday, UBS reaffirmed its Neutral stance on Scotts Miracle-Gro (NYSE:SMG), maintaining the price target at $67.00. The firm anticipates the company to release its third-quarter earnings next Wednesday, July 31, before market open. UBS's earnings per share (EPS) estimate of $2.20 surpasses the consensus figures of $1.96 and $1.93 from Visible Alpha and FactSet, respectively.
The analyst noted that despite Scotts Miracle-Gro's reaffirmation of its fiscal year 2024 guidance during last week's in-person Investor Day, investor sentiment remains divided. There are concerns that the second half of the year may not align with the consensus estimates, potentially leading to lower-than-expected results for the upcoming quarter.
The debate among investors has reportedly shifted towards fiscal year 2025, with a focus on the company's potential for a robust margin recovery and its impact on significant bottom-line growth. While the profit narrative is compelling, UBS suggests that clarity on the foundational elements and the rate of recovery is necessary before adopting a more positive outlook.
The company's stock performance in the second half of the year is a subject of scrutiny, as investors question whether the seasonal trends have been accurately accounted for in the current models. As the growing season concludes, the discussion is evolving to consider the company's future financial health and the feasibility of achieving its ambitious margin recovery goals.
In other recent news, ScottsMiracle-Gro Company has been making significant strides in its strategic plans and investments. The company has announced its three-year objectives, aiming for an average annual growth rate of 3 percent and a return to historic adjusted gross margin rates above 30 percent. The company is also focusing on reducing debt, with balances down to $2.8 billion from $3.6 billion a year earlier.
ScottsMiracle-Gro has shown support for the merger between RIV Capital and Cansortium (OTC:CNTMF), two entities in the cannabis industry. The company, through its subsidiary The Hawthorne Collective, previously invested $175 million in RIV Capital and plans to exchange these notes for non-voting exchangeable shares in Cansortium upon merger approval.
The company also reported steady progress in its fiscal second quarter of 2024, with an optimistic outlook on its consumer business and strategic investments in the cannabis sector. The company anticipates achieving $575 million in adjusted EBITDA and $1 billion in free cash flow over two years. Despite a projected decline in Hawthorne's net sales, the company maintains a positive outlook and is exploring ongoing strategic options for Hawthorne.
InvestingPro Insights
As Scotts Miracle-Gro (NYSE:SMG) approaches its next earnings release, insights from InvestingPro suggest a mixed financial landscape. A notable InvestingPro Tip is the expectation of net income growth this year, which aligns with UBS's higher EPS estimate compared to consensus figures. Additionally, the company's commitment to dividend consistency is underscored by its 20-year track record of maintained dividend payments, currently offering a yield of 3.82%. This may appeal to income-focused investors amidst concerns over the company's short-term performance.
InvestingPro Data reveals a market capitalization of $3.93 billion, with recent revenue figures showing a slight downturn, reporting a decrease of 8.26% over the last twelve months as of Q2 2024. Despite this, the company's strong free cash flow yield, as indicated by its valuation, could be a compelling factor for investors looking for potential value plays. With the stock trading at $69.18, close to UBS's price target of $67.00, investors might find the current price to reflect the underlying fundamentals.
For those seeking further guidance, InvestingPro offers additional tips on Scotts Miracle-Gro, providing deeper analysis on factors such as earnings revisions, valuation multiples, and profitability predictions. Interested readers can unlock these insights and more with a subscription to InvestingPro, and using the coupon code PRONEWS24, they can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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