What happened

Shares of Scotts Miracle-Gro (SMG 4.60%) were volatile today. The lawn care products maker fell this morning after it released fiscal fourth-quarter earnings, but investors seemed to give the stock a second look later in the day as the stock swung higher through the afternoon before giving back most of those gains. 

Scotts Miracle-Gro stock was down as much as 5% this morning, but by 2:33 p.m. ET, the stock was up 4.9% before falling again as investors interpreted the latest Federal Reserve rate decision. 

So what

It was another ugly quarter for Scotts, as the company is seeing demand normalize after a spike during the pandemic.

Sales fell 33% to $493.6 million, which badly missed estimates of $519.9 million. Performance was weak in both its U.S. consumer segment, which saw a revenue decline of 18%, and Hawthorne, the segment focused on cannabis growers, which saw a 49% drop in sales.

Bottom-line results were equally disappointing, as the company posted an adjusted loss of $2.04, which compared to an $0.82 per-share loss in the quarter a year ago and estimates of a $1.97 per-share loss.

CEO Jim Hagedorn said, "While we were disappointed with our overall financial performance for the year, we remained within our leverage covenants and established a path forward to return the company to acceptable levels of profitability."

Now what

Guidance for fiscal 2023 called for just low-single-digit adjusted operating income, but after digesting the earnings report, investors seemed to bet that the worst is now behind Scotts, especially given the valuation.

Based on adjusted earnings per share of $4.10 over the past year, the stock trades at a price-to-earnings ratio of 12, and earnings are likely to improve over time. Scotts also offers a dividend yield of 5.7%, making it an attractive dividend stock in spite of its recent struggles.

The company announced an additional $85 million cost-cutting program, and management called for $1 billion in free cash flow over the next two years, showing its cash position is still strong. If management can deliver on that forecast, the stock should see better days ahead.