Stifel cuts Scotts Miracle-Gro stock rating on inventory concerns

On Monday, Stifel analysts downgraded Scotts Miracle-Gro stock (NYSE: SMG) from a Buy to a Hold rating, adjusting the price target to $71 from $70. This decision follows the company’s recent update, which saw its shares rise by 13.4%, compared to a 0.5% gain in the S&P 500.

The analysts expressed concerns over the updated U.S. consumer revenue guidance, which they believe highlights potential risks related to channel inventory. While the company maintains a solid financial foundation with annual revenue of $3.45 billion and a "GOOD" overall financial health score according to InvestingPro, analysts noted that channel inventory concerns could limit the company’s fiscal year 2025 upside, especially with an uncertain fiscal year 2026 ahead.

Despite these concerns, the analysts acknowledged their enthusiasm for Scotts Miracle-Gro’s U.S. Consumer business, which is expected to invest and strengthen its platform. However, they believe the risks and rewards now favor a neutral stance, with estimates considering peak earnings growth during the company’s recovery phase.

The analysts also pointed out that Scotts Miracle-Gro shares are now at parity with its Consumer Staples peers, trading at 17 times the projected fiscal year 2026 earnings per share. They highlighted the need to remain agile given the company’s investment plans and below-the-line items that influence their below-consensus outlook.

Scotts Miracle-Gro’s recent performance and future guidance have led Stifel to adopt a more cautious approach, reflecting the potential challenges and opportunities facing the company in the near term.

In other recent news, Scotts Miracle-Gro reported its second-quarter 2025 earnings, revealing a slight beat on earnings per share (EPS) with $3.98 against the forecasted $3.94, but a miss on revenue, which came in at $1.42 billion compared to the expected $1.5 billion. This revenue shortfall has been a concern for investors, although the company reaffirmed its full-year EBITDA guidance of $570 to $590 million. Truist Securities responded to the earnings by raising the company’s stock price target to $75, maintaining a Buy rating, highlighting strong consumer point-of-sale sales growth and favorable weather comparisons. Meanwhile, Stifel downgraded the stock from Buy to Hold, citing concerns over U.S. consumer revenue guidance and potential channel inventory risks.

UBS maintained a Neutral rating on Scotts Miracle-Gro, keeping the price target at $54, while noting the company’s strong performance relative to its peers and expectations of margin recovery in fiscal year 2026. Despite the downgrade by Stifel, they raised the price target to $71, reflecting the company’s progress amid its recovery phase. The company has also reaffirmed its fiscal year 2025 guidance, emphasizing growth in consumer point-of-sale units and a projected interest expense decrease of about $30 million. Scotts Miracle-Gro plans to provide further updates at an upcoming conference, focusing on its long-term strategy, including advancements in e-commerce. These developments reflect a mix of optimism and caution among analysts and investors regarding the company’s future financial performance.

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