SCOTTS MIRACLE-GRO CO (NYSE:SMG) reported fiscal third-quarter results that beat earnings expectations but fell slightly short on revenue, sending shares lower in pre-market trading as investors weighed the mixed performance against an updated full-year outlook that calls for accelerated EPS growth.
Earnings vs Expectations
A closer look at the numbers reveals a clear divergence in the company's performance. On the bottom line, non-GAAP adjusted earnings from continuing operations came in at $2.82 per diluted share, topping the analyst consensus estimate of $2.5148 by roughly 12%. Adjusted net income from continuing operations rose 9% year over year to $166.9 million, helped by stronger results from the Bonnie Plants joint venture and a lower effective tax rate.
Revenue, however, was slightly below expectations. Net sales of $1.172 billion compared with the analyst estimate of $1.184 billion, a gap of about 1%. On a reported basis, revenue edged 1% higher than the prior year's third quarter. Management attributed the modest growth to seasonal demand patterns and early progress on its SMG 2.0 strategy, but higher freight and commodity costs tied to the Iran conflict weighed on margins.
Key metrics from the quarter included:
- GAAP gross margin: 31.2% vs 32.1% a year ago, down 90 basis points
- Non-GAAP adjusted gross margin: 31.3%, down 100 basis points year over year
- GAAP net income from continuing operations: $1.75 per diluted share, down 34% due to impairment and restructuring charges
- Net leverage ratio: improved to 3.78x from 4.15x a year ago
The pre-market reaction of roughly -4.4% suggests the market is focusing on the revenue miss and the gross margin compression, even as the company delivered a substantial EPS beat. Gross margin remains a key area of focus, though management noted that expansion is still on track for the full year through supply chain automation, AI use, and capital investments.
Updated Full-Year Guidance and Analyst Estimates
Management raised its full-year non-GAAP adjusted EPS from continuing operations to $4.30-$4.45, up from the prior range of $4.15-$4.35. The midpoint of the new range ($4.375) sits above the company's earlier outlook, reflecting confidence in the remaining quarters. The full-year revenue guidance was reaffirmed with U.S. Consumer net sales expected to grow low single digits. The company also maintained its non-GAAP adjusted gross margin target of at least 32%, adjusted EBITDA growth in the mid-single digits, and free cash flow of $275 million.
Compared to the broader analyst estimates for the full year, the revised EPS guidance aligns well with the consensus figures available. The revenue outlook, however, may still be a point of caution given the Q3 shortfall.
What to Watch Going Forward
The company's SMG 2.0 strategy, which includes channel expansion, innovation, and a shift in consumer engagement, is still in the early stages. The recently completed divestiture of the Hawthorne business should simplify the story and strengthen the balance sheet. Leverage continues to improve, and free cash flow guidance of $275 million provides a clear path for debt reduction.
Investors should also note the leadership transition. Nate Baxter, who became CEO in late June after Jim Hagedorn's retirement, has the full backing of the founding Hagedorn family. That stability may help the company execute on its long-term plan.
For a deeper look at historical performance and earnings trends, you can review the full earnings history here. To see the latest projections and forward estimates, access the forecast data here.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »
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Scotts Miracle-Gro (NYSE:SMG) Shares Dip on Q3 Revenue Miss Despite Earnings Beat and Raised Guidance
SCOTTS MIRACLE-GRO CO (NYSE:SMG) reported fiscal third-quarter results that beat earnings expectations but fell slightly short on revenue, sending shares lower in pre-market trading as investors weighed the mixed performance against an updated full-year outlook that calls for accelerated EPS growth.
Earnings vs Expectations
A closer look at the numbers reveals a clear divergence in the company's performance. On the bottom line, non-GAAP adjusted earnings from continuing operations came in at $2.82 per diluted share, topping the analyst consensus estimate of $2.5148 by roughly 12%. Adjusted net income from continuing operations rose 9% year over year to $166.9 million, helped by stronger results from the Bonnie Plants joint venture and a lower effective tax rate.
Revenue, however, was slightly below expectations. Net sales of $1.172 billion compared with the analyst estimate of $1.184 billion, a gap of about 1%. On a reported basis, revenue edged 1% higher than the prior year's third quarter. Management attributed the modest growth to seasonal demand patterns and early progress on its SMG 2.0 strategy, but higher freight and commodity costs tied to the Iran conflict weighed on margins.
Key metrics from the quarter included:
The pre-market reaction of roughly -4.4% suggests the market is focusing on the revenue miss and the gross margin compression, even as the company delivered a substantial EPS beat. Gross margin remains a key area of focus, though management noted that expansion is still on track for the full year through supply chain automation, AI use, and capital investments.
Updated Full-Year Guidance and Analyst Estimates
Management raised its full-year non-GAAP adjusted EPS from continuing operations to $4.30-$4.45, up from the prior range of $4.15-$4.35. The midpoint of the new range ($4.375) sits above the company's earlier outlook, reflecting confidence in the remaining quarters. The full-year revenue guidance was reaffirmed with U.S. Consumer net sales expected to grow low single digits. The company also maintained its non-GAAP adjusted gross margin target of at least 32%, adjusted EBITDA growth in the mid-single digits, and free cash flow of $275 million.
Compared to the broader analyst estimates for the full year, the revised EPS guidance aligns well with the consensus figures available. The revenue outlook, however, may still be a point of caution given the Q3 shortfall.
What to Watch Going Forward
The company's SMG 2.0 strategy, which includes channel expansion, innovation, and a shift in consumer engagement, is still in the early stages. The recently completed divestiture of the Hawthorne business should simplify the story and strengthen the balance sheet. Leverage continues to improve, and free cash flow guidance of $275 million provides a clear path for debt reduction.
Investors should also note the leadership transition. Nate Baxter, who became CEO in late June after Jim Hagedorn's retirement, has the full backing of the founding Hagedorn family. That stability may help the company execute on its long-term plan.
For a deeper look at historical performance and earnings trends, you can review the full earnings history here. To see the latest projections and forward estimates, access the forecast data here.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »