Acquiring Largest U.S. Hydroponics Distributor; Reducing Estimates
- SMG is acquiring Sunlight Supply, the largest hydroponic distributor in the U.S., which is expected to be dilutive to EPS by 30 cents-to-40 cents in FY18 (due to non-cash purchase accounting adjustments including amortization, increased deal costs and interest expense) but accretive by 60 cents-to-80 cents in FY19;
- Sunlight will boost SMG’s hydroponics business (including cannabis) to approximately 20% of corporate sales in FY19 (from around 11% currently), and gives SMG vertical integration and a direct relationship with more than 1,800 hydroponic retail customers;
- Due to the prolonged winter negatively impacting SMG’s core lawn and garden business in the current quarter, as well as continued cannabis market disruptions in California, we are reducing our estimates (excluding the pending Sunlight acquisition, expected to close by June 1st) to $4.29 for FY18 (from $4.74), and $5.07 (vs $5.34) for FY19.
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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