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Why Scotts Miracle-Gro Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Scotts Miracle-Gro (NYSE: SMG  ) sank 10% on Wednesday after the lawn- and garden-care specialist said it would fall short of its full-year guidance.

So what: Scotts Miracle-Gro usually benefits from the peak gardening season in mid to late May, but slowing sales momentum at its biggest U.S. retail partners reinforces fears over a declining trend for lawn and garden care. Additionally, poor weather and economic uncertainty continues to weigh on the company's European business, giving investors little hope for a near-term turnaround.  

Now what: As a result of the weak year-to-date demand, management expects to fall short of its previous outlook of 6% to 8% sales growth and adjusted EPS of $2.65 to $2.85. "While we remain confident in the long-term growth opportunities in our business, it is clear that near-term category growth has become harder to achieve," Chairman and CEO Jim Hagedorn said. Of course, with the stock down roughly 30% over just the past couple of months and currently sporting a 3%-plus dividend yield, now might be an opportune time to buy into that long-term optimism.  

Interested in more info on Scotts Miracle-Gro? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Scotts Miracle-Gro. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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10/28/2016 10:03 AM
SMG $88.23 Up +0.23 +0.26%
Scotts Miracle-Gro CAPS Rating: *****