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Why Scotts Miracle-Gro Stock Gained 16% in January

What happened

Scotts Miracle-Gro (NYSE: SMG) stock shareholders beat the market last month as their investment gained 16% compared to a roughly flat result for the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally added to healthy returns for the lawn and garden care specialist, given that shares more than doubled the S&P's 30% return in 2019.

Image source: Getty Images.

So what

January's spike was powered by the company's announcement of surprisingly strong first-quarter results. On Jan. 29, Scotts revealed that sales jumped 23%, in fact. Most of that increase came from its cannabis-leveraged Hawthorne brand, but management also noted strength in its consumer segment during a traditionally weak season for lawn and garden care.

Now what

Scotts Miracle-Gro is on track to generate sales growth of between 4% and 6% this year as gains from recent acquisitions slow over the next few quarters. Yet with margins rising thanks to rising prices and increased production efficiencies, shareholders are hoping to see faster adjusted earnings growth as non-GAAP (adjusted) profits improve to between $4.95 per share and $5.15 per share from $4.47 per share in 2019.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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