1Q18 Misses by 7 Cents; Lowering FY18 Estimate but Maintaining Rating
- 1Q18 (Dec) adjusted loss per share of $1.08 (vs $0.88 a year earlier) was off 23% YoY and 7 cents below our projection, negatively impacted by the lower tax rate and share count in a loss generating quarter (a collective negative impact of 15 cents), and an organic decline at Hawthorne;
- Hawthorne (SMG’s hydroponics business including cannabis – 11% of corporate revenue in FY17) rose 20% in 1Q18, but was off 19% organically due to regulation uncertainty in California (comprising around 55% of the cannabis market);
- Our FY18 EPS estimate is now $4.74 (from $4.86 previously), up 20% from FY17, as the impact of regulatory changes in California is offset by the new U.S. tax law;
- Our FY19 EPS estimate remains $5.34, up 13% from our FY18 projection.
Scotts Miracle-Gro is a manufacturer and marketer of consumer lawn and garden products in North America. The company's segments are: United States Consumer, which consists of the company's consumer lawn and garden business located in United States; Hawthorne, which consists of the company's indoor, urban and hydroponic gardening business; and Other, which consists of the company's consumer lawn and garden business in geographies other than the United States and the company's product sales to nurseries, greenhouses and other customers. The company manufactures, markets and sells lawn and garden products in the following categories: lawn care, gardening and landscape, hydroponics, and controls.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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