Why Scotts Miracle-Gro Shares Dropped as Much as 7.5% Today
Shares of Scotts Miracle-Gro (NYSE: SMG), a lawn care specialist and provider of hydroponic products to the marijuana space, fell as much as 7.5% in morning trading on Aug. 3. The company's fiscal third-quarter earnings update was the cause of the downbeat mood on Wall Street. The reading was pretty rough across the board.
On the top line, Scotts Miracle-Gro saw a 26% year-over-year sales decline. Its consumer business witnessed a sales drop of 14% while sales at the company's hydroponic operations, known as Hawthorne, plunged a painful 63%. Those are not good numbers, but they also weren't unexpected. Indeed, the company's $1.19 billion in sales was roughly in line with Wall Street's expectations. Adjusted earnings came in at $1.98 per share, down from $3.98 a year ago. Although that was not a strong comparison, it was actually better than the $1.70 per share which analysts had been projecting. Basically, it was a tough quarter, and while not a shock, per se, it was still a tough read.
The big problem for investors, however, was likely related to the company's outlook. Here management trimmed guidance, with sales expected to be lower by between 8% and 9%. The adjusted earnings outlook declined to between $4 and $4.20 per share, down from the previous range of $4.50 to $5 per share offered up in June. The June guidance, notably, already represented a reduction from earlier guidance. The company is dealing with weaker-than-expected demand, particularly in its Hawthorne operations, and rising costs. Management is working to adjust to a changed environment, but it clearly appears to be behind the curve right now. Investors reacted to all of this news as you might expect.
Source Fool.com
