SMG stock has done a breakout and is now pulling back and consolidating.
In April 2018, Scotts announced the acquisition of Sunlight Supply, the largest hydroponic distributor in the U.S., for $450 million. It combined Sunlight with Hawthorne, whose target market is professional growers, including cannabis producers, and presto, Scotts now had a profit line coming from the rapidly expanding legal cannabis movement. Scotts said that the new entity they formed would record earnings of $600 million and market to over 1,800 hydroponic retail stores in North America. Hawthorne’s 2019 revenues rocketed by 95 percent to $671.2 million. Excluding the sales from its Sunlight acquisition, sales still grew by 24%, which was three times the revenue growth of its U.S. customer enterprise. In 2020, SMG expects Hawthorne to increase its sales another 12% to 15%, compared to 1% to 3% for its U.S. consumer division.
The rising large players volume in SMG stock looks beautiful and the Twiggs Money Flow confirms the stock is being accumulated. SMG stock is currently consolidating and I’d like to see a bit more of consolidation or even a pullback before considering a long entry.
On January 29, 2020, Scotts Miracle-Gro (NYSE: SMG) reported Q1 adj. EPS of ($1.12), versus the consensus estimate of ($1.27). The company reports Q1 revenue of $365.8M versus the consensus estimate of $341.67M.
“We continue to see outstanding performance across all product categories of our Hawthorne business in the United States, with double-digit growth in long-standing markets such as California and Colorado and even stronger performance in emerging markets like Michigan and Florida,” said Jim Hagedorn, chairman and chief executive officer. “Hawthorne continues to distance itself from its largest competitors as indoor growers see us as a complete solution for their needs. The strong momentum we saw in our U.S. Consumer segment last year also carried into fiscal 2020. We remain encouraged by the level of retailer engagement in all channels as we prepare for the upcoming lawn and garden season. As we look to the balance of the year, we remain confident in our fiscal 2020 guidance of company-wide sales growth of 4 to 6 percent, adjusted earnings in a range of $4.95 to $5.15 per share and free cash flow of approximately $300 million.”
On February 6, 2020, The Scotts Miracle-Gro Company (NYSE: SMG), one of the world’s leading marketers of branded consumer lawn and garden as well as hydroponic and indoor growing products, announced its Board of Directors has authorized a new program to repurchase up to $750 million of the Company’s shares over the next three years.
The timing and number of shares repurchased will depend on numerous factors, including the performance of the business, share price, market conditions and alternative investment opportunities.
“We have made significant improvement in our cash flow generation over the past several years, giving us the flexibility to invest in future growth and return cash to shareholders,” said Randy Coleman, chief financial officer and executive vice president. “While we expect no material acquisition activity in the near future, we continue to explore opportunities in both our U.S. Consumer and Hawthorne segments and would be willing to slow or suspend future share repurchase activity if we believed there were a more beneficial use of cash to deliver shareholder value.”