Scotts (SMG) Could Return More 'Green' to Investors Next Year - Barron's
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Though the stock made an enviable effort following a massive $7 drop after cutting its outlook for fiscal 2012, Scotts Miracle-Gro (NYSE: SMG) shares are 9.3 percent lower from the close on June 12th.
But, at least one outlet is getting bullish on the prospects for America's lawn and garden market leader. Investors will just have to wait until 2013 before harvesting gains.
Over the weekend, Barron's said that the recent outlook cut along with May sales numbers which missed expectations drove shares down to trading at 16 times expected fiscal 2013 earnings, currently expected at $2.52. Though that's not far from its historical average, Scotts' vow to maintain prices while allocating an additional $40 million to advertising this year could hamper earnings by 80 cents per share.
Scotts -- the maker of such products as Scotts Turf Builder, EZ Seed, Miracle-Gro, and Ortho Round-Up -- has ins with a key market segment: older folks. Barron's noted how older people tend to do more gardening and with more and more baby boomers moving into retirement every year, giving them more time for hobbies, the gardening market is also expected to blossom.
Barron's also cited the principle of Boyar Intrinsic Value Research in saying the Scotts might tire of being a public company, opting to go private sometime in the future. Scotts CEO Jim Hagedorn -- who's family controls about 31 percent of outstanding shares -- could do just that. In addition, Scotts market cap of $2.4 billion and net debt of $1.3 billion would be an easy company to move out of public trading.
The analyst from Boyar thinks Scotts shares could double from current prices over the next year, expecting potential earnings of $5 per share soon. Even moving to $55 would add 39 percent of upside from last Friday's closing price.
Two concerns traders might want to evaluate include brand strength as well as strong ties to weather. The early warm weather in 2012 may have caught Scotts offguard, with key partners Home Depot (NYSE: HD), Lowe's (NYSE: LOW), and Wal-Mart (NYSE: WMT) issuing mixed first-quarter reports. Investors and traders will likely keep a keen eye on the three companies second-quarter results, which will also reflect spring sales trends.
As mentioned, Scotts isn't increasing prices this year, possibly to retain market share. However, Hagedorn previously affirmed that Scotts will look to do so next year.
Shares are up about 0.9 percent in early trading.
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But, at least one outlet is getting bullish on the prospects for America's lawn and garden market leader. Investors will just have to wait until 2013 before harvesting gains.
Over the weekend, Barron's said that the recent outlook cut along with May sales numbers which missed expectations drove shares down to trading at 16 times expected fiscal 2013 earnings, currently expected at $2.52. Though that's not far from its historical average, Scotts' vow to maintain prices while allocating an additional $40 million to advertising this year could hamper earnings by 80 cents per share.
Scotts -- the maker of such products as Scotts Turf Builder, EZ Seed, Miracle-Gro, and Ortho Round-Up -- has ins with a key market segment: older folks. Barron's noted how older people tend to do more gardening and with more and more baby boomers moving into retirement every year, giving them more time for hobbies, the gardening market is also expected to blossom.
Barron's also cited the principle of Boyar Intrinsic Value Research in saying the Scotts might tire of being a public company, opting to go private sometime in the future. Scotts CEO Jim Hagedorn -- who's family controls about 31 percent of outstanding shares -- could do just that. In addition, Scotts market cap of $2.4 billion and net debt of $1.3 billion would be an easy company to move out of public trading.
The analyst from Boyar thinks Scotts shares could double from current prices over the next year, expecting potential earnings of $5 per share soon. Even moving to $55 would add 39 percent of upside from last Friday's closing price.
Two concerns traders might want to evaluate include brand strength as well as strong ties to weather. The early warm weather in 2012 may have caught Scotts offguard, with key partners Home Depot (NYSE: HD), Lowe's (NYSE: LOW), and Wal-Mart (NYSE: WMT) issuing mixed first-quarter reports. Investors and traders will likely keep a keen eye on the three companies second-quarter results, which will also reflect spring sales trends.
As mentioned, Scotts isn't increasing prices this year, possibly to retain market share. However, Hagedorn previously affirmed that Scotts will look to do so next year.
Shares are up about 0.9 percent in early trading.
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