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TheStreet Open House

Will This Upgrade Help Scotts Miracle-Gro (SMG) Stock Today?

NEW YORK (TheStreet) -- Scotts Miracle-Gro Company (SMG) was upgraded to "outperform" from "market perform" at BMO Capital (BMO)

The firm said it upgraded the lawn and garden products manufacturer and marketer company after reading positive consumer surveys.

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TheStreet Ratings team rates SCOTTS MIRACLE-GRO CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SCOTTS MIRACLE-GRO CO (SMG) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, growth in earnings per share, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Chemicals industry and the overall market, SCOTTS MIRACLE-GRO CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • SCOTTS MIRACLE-GRO CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SCOTTS MIRACLE-GRO CO increased its bottom line by earning $2.56 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $2.56).
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 29.66% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • SMG, with its decline in revenue, underperformed when compared the industry average of 12.7%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income increased by 3.1% when compared to the same quarter one year prior, going from -$67.70 million to -$65.60 million.
  • You can view the full analysis from the report here: SMG Ratings Report

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