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The Scotts Miracle Gro Co A SMG

Rating as of

Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Lowering Our Scott's Miracle-Gro FVE to $158 on Lower Guidance and Acquisitions; Fairly Valued

Seth Goldstein, CFA Senior Equity Analyst

Analyst Note

| Seth Goldstein, CFA |

On Jan. 4, narrow-moat Scotts Miracle-Gro announced two acquisitions made by its Hawthorne segment. The company also announced updated fiscal 2022 guidance for a decline in Hawthorne sales, despite the acquisitions, due to a slowdown in the cannabis market. We have reduced our near-term outlook for Hawthorne, but our long-term outlook for high-single-digit average annual growth is unchanged. Having updated our model to reflect the acquisition and updated guidance, as well as our reduced U.S. corporate tax rate assumptions, we are reducing our fair value estimate to $158 per share from $160. Our narrow moat rating is unchanged. We see the shares as currently fairly valued, trading near our fair value estimate and in 3-star territory.

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Company Profile

Business Description

Scotts Miracle-Gro is the largest provider of gardening and lawncare products in the United States. The majority of the company's sales are to large retailers that include Home Depot, Lowe's, and Walmart. Scotts Miracle-Gro can sell its products at a higher price point than its competition because of a well-recognized portfolio of brands that include Miracle-Gro, Roundup, Ortho, Tomcat, and Scotts. Scotts is also the leading supplier of cannabis-growing equipment in North America through its Hawthorne business.

Contact
14111 Scottslawn Road
Marysville, OH, 43041
T +1 937 644-0011
Sector Basic Materials
Industry Agricultural Inputs
Most Recent Earnings Sep 30, 2021
Fiscal Year End Sep 30, 2022
Stock Type Cyclical
Employees 7,300