Please ensure Javascript is enabled for purposes of website accessibility

Why Scotts Miracle-Gro Surged 15% in May

By Lee Samaha – Jun 3, 2020 at 6:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's earnings report was very positive, and there could be more good news on the way.

What happened

Shares in lawn and garden care products company Scotts Miracle-Gro (SMG -2.83%) rose 14.9% in May, according to data provided by S&P Global Market Intelligence. The move was sparked by an impressive set of second-quarter earnings released in the first week of the month.


A cannabis plant. Image source: Getty Images.

Net sales rose 16% in the second quarter and 18% in the first half overall. While the whopping 51% sales increase at Hawthorne Gardening (a subsidiary of Scotts Miracle-Gro specializing in hydroponics products often used in cannabis production) in the first half caught the eye, the U.S. consumer segment (outdoor lawn and garden products) also rose 11% in the first half.

So what

The reason for the strong rise in both segments may well come down to the COVID-19-imposed quarantines causing people to take more interest in gardening at home and smoking pot. Of course, if these interests take hold, then demand may well prove sustainable over the long term.

In addition, management's positive commentary on current trading suggested the possibility that sales could surpass current full-year guidance for a 6% to 8% increase. As a reminder, Scotts' sales tend to be highly seasonal with around 75% of them coming in the second and third quarter.

As such, investors can look forward to an update in early June when management should give more color on the subject.

Now what

In the near term, investors will obviously be looking to see if the strong trading trends can continue. In addition, if the COVID-19 lockdowns really have led to a renewed interest in gardening and new interest in growing pot, then Scotts could see a longer-term benefit as well.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Scotts Miracle-Gro. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Scotts Miracle-Gro Company Stock Quote
The Scotts Miracle-Gro Company
$42.87 (-2.83%) $-1.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.