UPDATE: UBS Downgrades Scotts Miracle-Gro (SMG) to Neutral
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UBS analyst Peter Grom downgraded Scotts Miracle-Gro (NYSE: SMG) from Buy to Neutral with a price target of $92.00 (from $125.00).
The analyst comments "We are downgrading SMG to Neutral from Buy as we believe limited top/bottom line recovery coupled with a levered balance sheet (~6x over the next 12 months) will keep shares range bound until the next lawn & garden season. Although we remain constructive on LT growth potential for SMG, visibility will remain limited given broader macro pressures, uncertainty on consumer engagement/household penetration, and a that has yet to show any signs of improvement. Beyond the top line uncertainty, we see downside vs. current Street expectations in FY23 and believe outsized margin recovery will likely prove to be a FY24 narrative. Even though shares are down -46% YTD and trading at a MSD premium to SMid-cap HPC peers (vs. 5-yr avg. of +21% premium), the lack of visibility/balance sheet dynamics moves us to the sidelines."
Shares of Scotts Miracle-Gro closed at $87.19 yesterday.
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