Scotts Miracle-Gro rises after upgrade to Buy at Stifel

Scotts Miracle-Gro (NYSE:SMG) was upgraded to Buy from a previous investment rating of Hold by analysts at Stifel. They said the maker of lawn and gardening supplies is poised to increase profitability and that its debt is manageable. Scotts Miracle-Gro’s (SMG) stock advanced 3% by 9:36 a.m. ET.
“The shares [have] been volatile with significant focus recently on adverse March weather implications,” W. Andrew Carter, analyst at Stifel, said in an April 30 report. “While a headwind, we believe the outsized attention is misplaced with April weather of greater consequence and favorable.”
Stifel raised its EPS estimate for Scotts Miracle-Gro (SMG) to $3.83 from $3.58 previously for the company’s fiscal second quarter. Scotts Miracle-Gro (SMG) reports 2Q earnings on Wednesday.
“We believe the recent leverage update implied a stronger margin profile providing added flexibility to achieve FY23 profit guidance,” according to Stifel, referring to Scott-Miracle Gro’s (SMG) disclosure last month about its debt level.
Stifel said Scott-Miracle Gro’s (SMG) Hawthorne Gardening segment, which makes hydroponic products for customers including cannabis growers, faces difficulties.
“Base case, we believe the Hawthorne business treads water with the ability to survive difficult category conditions, enhance its position through attrition, and disproportionately capitalize on a fulsome category recovery,” according to Stifel. “Conversely, the company has alluded to M&A/partnerships that we believe could increase investor enthusiasm, unlock value and/or accelerate the deleverage path.”
Stifel raised its price target for Scotts Miracle-Gro (SMG) $80 a share from $65 a share previously, based on an enterprise value-to-EBITDA multiple of 12 times 2024 EBITDA.
Seeking Alpha contributor MJ Investing has a Hold rating on Scotts Miracle-Gro (SMG) based on its dividend yield. Columnist Prasanna Rajagopal also rates Scotts Miracle-Gro (SMG) as a Hold because of concerns about consumer spending.
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