2024-07-03 23:10:23 ET
Summary
- Scotts Miracle-Gro shares have been volatile due to their debt load, retailer inventory destocking, and weak cannabis supply business.
- Management lowered EBITDA guidance due to weaker consumer sales growth, but maintained cash flow targets given working capital improvement.
- The company aims to reduce debt, improve profitability through cost-cutting, and inventory rationalization, but faces challenges in consumer activity and marketing effectiveness.
- Shares are likely to be dead money with limited capital returns beyond the existing dividend.
Shares of Scotts Miracle-Gro ( SMG ) have been a rollercoaster over the past year, trading between the mid-$40’s and mid-$70’s, even as they are essentially flat from a year ago. Much of this volatility has been driven by its large debt load and retailers’ inventory destocking, as well as ongoing weakness in its cannabis supply business. After being somewhat cautious on SMG, I upgraded shares to a “buy” in April based on an encouraging operational update ahead of its critical second quarter, which put its deleveraging plan on a clearer footing. I believed progression of this plan could push shares into the $80s....
Read the full article on Seeking Alpha
For further details see:
Scotts Miracle-Gro: Subdued Spending And Channel Inventories Reduce Upside Potential