SMG - Scotts Miracle-Gro: Encouraging Update Boosts Credibility (Rating Upgrade)
2024-04-08 06:49:43 ET
Summary
- Scotts Miracle-Gro's shares have rallied 22% and exceeded expectations, indicating a potential turn in the business and increased market share.
- The company's operational update shows impressive sales growth despite difficult industry conditions, suggesting a durable recovery.
- SMG's balance sheet and debt reduction efforts are improving, positioning the company for future growth and upside surprises.
Shares of Scotts Miracle-Gro ( SMG ) have been a roller coaster this year, trading basically flat over the past 12 months, but they are up about 2/3 from their low. Back in January , I downgraded Scotts to a "hold" from a "buy" as I did not view remaining upside to $72 as particularly compelling given its significant debt load and execution risk; plus after a 60% rally, I did not want to be greedy. In hindsight, this proved excessively cautious as shares have rallied 22%, ahead of the S&P's 9% return, even topping my optimistic price target. Given this performance and its operational update, we should revisit shares. I am returning to the bullish camp....
Scotts Miracle-Gro: Encouraging Update Boosts Credibility (Rating Upgrade)