UBS maintains neutral rating on Scotts Miracle-Gro stock

On Wednesday, UBS analysts maintained a Neutral rating on Scotts Miracle-Gro (NYSE: SMG) stock, keeping the price target at $54.00. With an "GOOD" overall financial health score according to InvestingPro and a 21-year track record of consistent dividend payments, the company is expected to provide an update on its fiscal year 2025 guidance at a competitor conference this Thursday.

Despite Scotts Miracle-Gro shares facing a year-to-date decline of 13%, the stock showed strong performance following its second-quarter results in late April, gaining 14.5% and outperforming its SMid-Cap HPC peers by over 1500 basis points during this period. The company maintains a healthy current ratio of 1.71 and analysts have set price targets ranging from $54 to $90.

The analysts highlighted that Scotts Miracle-Gro has become the most crowded long position among the SMid-Cap HPC group and remains a favored name in their coverage universe. They attribute the positive sentiment to expectations that fiscal year 2025 guidance is achievable and that fiscal year 2026 will bring significant margin recovery, leading to positive estimate revisions.

However, UBS analysts expressed the need for more clarity on the potential pace and magnitude of margin expansion and earnings growth for fiscal year 2026 to become more optimistic about the stock. They pointed out that the stock’s valuation compared to its SMid-Cap HPC peers is above historical averages, trading at a 39% premium versus a five-year historical average of 29%.

In other recent news, Scotts Miracle-Gro Company (NYSE:SMG) reported its second-quarter 2025 earnings, revealing a slight beat on earnings per share (EPS) but a miss on revenue expectations. The company announced an EPS of $3.98, exceeding the forecasted $3.94, yet reported revenue of $1.42 billion, falling short of the anticipated $1.5 billion. Despite this revenue shortfall, the company managed to improve its gross margin by nearly 500 basis points and reaffirmed its full-year EBITDA guidance of $570 to $590 million. Scotts Miracle-Gro also highlighted a 7% year-over-year decline in total net sales, with the U.S. Consumer segment experiencing a 5% decrease. Analyst discussions focused on the company’s promotional spending strategy and its impact on margins, as well as plans for managing leverage and potential mergers and acquisitions. The company is focused on organic growth and potential tuck-in acquisitions, aiming for an EBITDA of $700 million by fiscal 2027. Additionally, the company announced its intention to divest its Hawthorne businesses to improve gross margin and reduce volatility associated with the cannabis sector.

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