Why Scotts Miracle-Gro Stock Sank 19% in December

What happened

Scotts Miracle-Gro (NYSE:SMG) shed nearly 20% of its value last month, according to data provided by S&P Global Market Intelligence, continuing a post-earnings slide that began in November.

So what 

Scotts Miracle-Gro reported disappointing financial results on Nov. 7. The lawn and garden products company saw revenue decrease 2% in its consumer segment in the fourth quarter. Worse still, revenue in its cannabis-focused Hawthorne segment — which management views as a key growth driver — fell 15% in Q4 when excluding the impact of acquisitions, and a total of 27% in fiscal 2018. 

“There is little doubt that fiscal 2018 was one of our most challenging years in recent memory,” Chairman and CEO Jim Hagedorn said in a press release. 

Scotts Miracle-Gro faced some growth challenges in 2018. Image source: Getty Images

Now what

Looking forward, Scotts Miracle-Gro expects its sales to recover in 2019. The company says price increases should improve results in its consumer segment. It also expects its recent acquisition of garden-supplies distributor Sunlight Supply to help boost growth in its Hawthorne unit. Sunlight Supply holds a leading position in hydroponics (goods used to grow plants without soil), which is a popular method of growing cannabis.

All told, Scotts Miracle-Gro is targeting full-year revenue growth of as much as 11% in 2019. That, in turn, could help drive adjusted earnings nearly 16% higher, to $4.30. 

Investors may be beginning to buy into management’s optimistic outlook. Scotts Miracle-Gro’s stock is already up more than 10% so far in January. If the company can deliver on its growth targets, more gains may still lie ahead.

Joe Tenebruso 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.