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Scotts Miracle-Gro Shares Gain After Upgrade

The Associated Press

NEW YORK (AP) — Sliding costs of a key commodity and "healthy" sales growth this season will boost earnings of Scotts Miracle-Gro Co., an analyst said Monday, upgrading the stock. Shares rose more than 3 percent immediately after trading opened.

BMO Capital Markets analyst Connie Maneaty raised her rating to "Outperform" from "Market Perform" and hiked profit estimates for this fiscal year and 2010 after a meeting with the fertilizer company's management earlier this month.

Maneaty tacked on 8 cents per share for her earnings estimate for the year ending in September to $2.38 per share, saying the company's executives "feel good about May" sales of Ortho, Smith & Hawken and the namesake brand. May accounts for 20 percent of its U.S. consumer sales data. Maneaty said she felt "healthy" sales growth would continue, up 2 percent for the fiscal year.

In April, the Marysville, Ohio, company said its earnings for the year would be in the upper range of its $2.10 to $2.30 per share guidance.

For 2010, Maneaty raised her estimates by 20 cents to $2.85 per share, saying operating expenses would decline and sales would grow 3 percent for the year. Further, the price of urea, a key component of fertilizer, have fallen drastically from record prices last July, and if the company locks in 75 percent of its 2010 needs this year, it could shave 40 to 45 percent off its urea expenses, she said. In the year ending in September, she expects the company will have spent about $100 million to $105 million on urea, while in a "normal" year with "typical" prices the company spends about $80 million.

Wall Street analysts polled by Thomson Reuters expect earnings per share of $2.33 this year and $2.69 in 2010.

Scotts Miracle-Gro shares rose 3.4 percent, or $1.15, to $35.41 in early morning trading. Shares have traded in a 52-week range of $16.12 to $39.06.