1. The Scotts Miracle-Gro Company (NYSE:SMG)
Number of Hedge Fund Holders: 28
The Scotts Miracle-Gro Company (NYSE:SMG) is the world’s largest marketer of branded consumer products for lawn and garden care, with well-known brands such as Scotts, Miracle-Gro, and Ortho. Its subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting, and other materials for indoor and hydroponic growing.
In Q3 2024, The Scotts Miracle-Gro Company (NYSE:SMG) reported strong results, with total sales reaching $1.2 billion, up 7% from the previous year. The U.S. Consumer segment grew 11%, driven by promotions and strong consumer engagement.
However, the Hawthorne segment, focused on indoor and hydroponic gardening, saw a 28% sales decline due to discontinuing third-party brands. Despite this, gross margins improved due to lower direct costs, though SG&A expenses increased by 15% due to higher incentive compensation. Net income surged to $132.1 million, with earnings per share of $2.28, beating analysts’ expectations.
The Scotts Miracle-Gro Company (NYSE:SMG) also demonstrated strong liquidity, with free cash flow approaching $500 million, enabling significant debt reduction. Looking ahead, the company is focused on expanding consumer engagement through strategic promotions, while continuing to innovate in product lines, particularly in the Hawthorne division.
In January 2024, The Scotts Miracle-Gro Company (NYSE:SMG) introduced the Ortho GroundClear Super Concentrate flexible pouch, aiming to reduce plastic waste and make lawn care more convenient. While not recyclable, it marks a key step toward reducing plastic reliance in the lawn care industry.
The Scotts Miracle-Gro Company (NYSE:SMG) saw a dip of 1.65% in the past month but experienced a strong upsurge of 10.77% YTD, driven by solid financial performance and strategic improvements. Increased consumer engagement, steady sales growth, and a focus on debt reduction have strengthened the company’s foundation for future growth.
However, despite these positive developments, the company faces some challenges, particularly ongoing inflationary pressures that have impacted its pricing strategy. While modest price increases are planned for 2025, concerns from retailers over margins may limit the company’s ability to fully offset rising costs.
As of Q2 2024, 28 hedge funds, holding a combined investment of $270 million, are bullish on the stock, according to Insider Monkey’s database. Therefore, SMG makes it to our list of the Best Vertical Farming and Hydroponic Stocks to Buy.
SMG is one of the best vertical farming and hydroponic stocks to buy based on hedge fund sentiment. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SMG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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