The Scotts Miracle-Gro Company SMG has been benefiting from U.S. Consumer growth, margin expansion, supply chain savings, e-commerce momentum and debt reduction despite seasonal demand pressures. However, higher transportation and commodity costs, weak lawn demand, elevated capital spending and residual divestiture-related volatility could weigh on margins, cash flexibility and earnings growth.
The company’s shares have gained 0.2% over a year compared with the industry’s 3.7% rise.
Let’s find out why SMG stock is worth retaining for now.
Growth, Margin Expansion and Deleveraging Support Outlook
Scotts Miracle-Gro continues to benefit from its U.S. Consumer franchise, supply chain savings and a mix shift toward higher-margin branded products. In the first nine months of fiscal 2026, U.S. Consumer sales rose 2.1%, segment profit increased 6.1% and adjusted gross margin improved 110 basis points (bps) to 35.8%. Management raised fiscal 2026 adjusted EPS guidance to $4.30-$4.45 and kept expectations for low-single-digit U.S. Consumer sales growth, at least a 32% adjusted gross margin and mid-single-digit adjusted EBITDA growth. Its longer-term framework still targets roughly $1 billion of incremental sales and $1 billion of EBITDA around 2030 through innovation, pricing, e-commerce and disciplined tuck-in acquisitions.
The company’s portfolio holds leading positions across fertilizers, grass seed, spreaders, mulch, soils, plant food and rodent control within an addressable do-it-yourself (DIY) market of about $12 billion. Branded point-of-sale (POS) for the first nine months of fiscal 2026 rose 1.4% in dollars and 2.3% in units, while e-commerce POS advanced 27% and 33%, respectively. New products across lawns, organics, indoor gardening and controls, together with targeted younger-consumer marketing, support broader category penetration over time.
Scotts Miracle-Gro’s leverage ratio was 3.78 at the end of the third quarter of fiscal 2026, down from 4.15 a year earlier, as year-to-date adjusted EBITDA increased by $31 million and free cash flow continued to be directed toward debt reduction. Third-quarter interest expense fell to $28 million as average borrowings and borrowing rates declined. Management maintained fiscal 2026 free cash flow guidance of $275 million and a year-end leverage target in the high 3s, supporting further balance sheet improvement.
SMG Balances Liquidity and Capital Returns
Scotts Miracle-Gro’s liquidity remained adequate, supported by $195.2 million of cash generated from operations in the first nine months of fiscal 2026, broadly in line with $197.2 million a year earlier. Cash and cash equivalents were $27.7 million on June 27, 2026, while total debt was approximately $2.11 billion. The company continued to return capital to shareholders, paying $116.3 million in dividends during the first nine months. Although SMG maintains a $500 million share repurchase authorization, it did not buy back shares under the program during the period.
Cost Headwinds and Seasonal Demand Challenge SMG’s Growth
Higher transportation costs remained a drag in the third quarter of fiscal 2026, when adjusted gross margin declined 100 bps to 31.3%. Supply chain savings produced favorable material costs, but those benefits were net of higher commodity costs. Property, plant and equipment spending rose 16% to $63.1 million in the first nine months of fiscal 2026 as automation, enterprise resource planning (ERP) modernization and distribution investments continue. These outlays can limit cash flexibility even as management targets at least a 32% adjusted gross margin for fiscal 2026.
U.S. Consumer sales rose 0.3% in the third quarter of fiscal 2026, while segment profit declined 2.3% as gross margin fell. Branded Lawns POS was down 1% in both dollars and units year to date, with unfavorable May weather offsetting e-commerce growth and pricing. Earnings therefore remain exposed to seasonal demand as growth initiatives are executed.
The Hawthorne operating divestiture is complete, but the transaction still carries financial volatility. Scotts Miracle-Gro recorded a $101.8 million loss on the North American sale in the first nine months of fiscal 2026 and a $15.7 million unrealized loss on Vireo equity securities in the third quarter. Non-cash consideration therefore leaves residual exposure to Vireo’s valuation.
The Scotts Miracle-Gro Company Price and Consensus
The Scotts Miracle-Gro Company price-consensus-chart | The Scotts Miracle-Gro Company Quote
SMG’s Zacks Rank & Key Picks
SMG currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Consumer Staples space are Archer Daniels Midland Company ADM, The Chefs' Warehouse, Inc. CHEF and The Vita Coco Company, Inc. COCO. ADM, CHEF and COCO currently carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ADM’s current-year earnings stands at $5.22 per share, implying a 52.2% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 11.3%.
The Zacks Consensus Estimate for CHEF’s current-year earnings is pegged at $2.54 per share, implying a 33.7% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 30.4%.
The Zacks Consensus Estimate for COCO’s current-year earnings is pegged at $1.96 per share, indicating a 64.7% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing once, with the average surprise being 21.9%.
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This article originally published on Zacks Investment Research (zacks.com).