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On Monday, Stifel analysts downgraded Scotts Miracle-Gro stock from Buy to Hold. The decision follows an update from the company last week, during which its shares rose by 13.4%, compared to a 0.5% increase in the S&P 500 index. The analysts noted that the market’s response was appropriate, recognizing the company’s positive outlook, with key guidance items reaffirmed despite challenging conditions.
The analysts expressed concerns over the updated U.S. consumer revenue guidance, which they interpret as a potential indicator of channel inventory risk. This concern limits the upside for fiscal year 2025, especially in light of uncertainties for fiscal year 2026, including investment plans and other financial factors that have led to a below-consensus outlook. InvestingPro analysis indicates the stock is currently trading slightly above its Fair Value, with a P/E ratio of 106x and an EV/EBITDA of 13.9x.
Scotts Miracle-Gro’s shares are expected to remain volatile, according to the analysts, which aligns with InvestingPro observations of the stock’s price movements. They emphasized their continued interest in the U.S. Consumer business, which is seen as a strong platform for future growth. The company, which has maintained dividend payments for 21 consecutive years with a current yield of 4%, is anticipated to invest in this area while working towards its target leverage.
Despite the downgrade, the analysts raised the price target for Scotts Miracle-Gro to $71 from the previous $70. This adjustment reflects the company’s progress and potential amid its recovery phase, with shares now aligning with Consumer Staples Peers at 17 times projected fiscal year 2026 earnings per share.
The analysts concluded that the current risk-reward scenario warrants a neutral stance on the stock, considering the peak earnings growth amid the ongoing recovery.
In other recent news, Scotts Miracle-Gro Company (NYSE:SMG) reported its second-quarter 2025 earnings, which showed a slight beat on earnings per share (EPS) at $3.98 compared to the forecasted $3.94. However, the company fell short on revenue, reporting $1.42 billion against an expected $1.5 billion, resulting in a 7% year-over-year decrease in total net sales. Despite this, Scotts Miracle-Gro reaffirmed its full-year EBITDA guidance, projecting between $570 million and $590 million, signaling confidence in meeting its financial targets. The company also maintained its full fiscal year 2025 guidance, expecting U.S. Consumer net sales growth in the low single digits and a non-GAAP adjusted gross margin of around 30%.
In terms of analyst activity, Truist Securities raised Scotts Miracle-Gro’s stock price target to $75 while maintaining a Buy rating, reflecting optimism during the peak lawn and garden season. UBS analysts, on the other hand, maintained a Neutral rating with a price target of $54, citing the need for more clarity on margin expansion and earnings growth for fiscal year 2026. Scotts Miracle-Gro’s consumer point-of-sale sales grew by 12% through the first half of the fiscal year, indicating strong consumer demand. Additionally, the company projects a reduction in interest expense by $30 million compared to the previous year, further supporting its financial outlook. These developments come as the company plans to provide further details during its presentation at the William Blair 45th Annual Growth Stock Conference.
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