Scotts Miracle-Gro's Recent Share Pullback Creates 'Attractive' Risk/Reward Setup, UBS Says

MT Newswires Live10-16

Scotts Miracle-Gro's (SMG) recent share-price decline has created an "attractive" risk/reward setup, while the market appears to be pricing in growth below the company's medium-term algorithm, UBS Securities said in a report Thursday.

The company can still achieve "on algorithm EPS growth" as low- to mid-single-digit organic revenue growth combines with productivity and mix initiatives that remain in the "early innings." The firm expects sales growth of 2.2% in fiscal 2027 and 2.4% in fiscal 2028, both above consensus, according to the report.

Although inflation, higher interest rates and a "K-shaped consumer" remain concerns, the firm said Scotts' top line has been "historically resilient" and that a greater share of sales now comes from "higher-income households," providing some insulation from a downturn, the report said.

The firm also sees a path to margin expansion, citing the company's pricing power and productivity initiatives that could help offset cost pressures, according to the report.

UBS upgraded Scotts Miracle-Gro to buy from neutral and lowered its price target to $70 from $78.

Price: 53.35, Change: +3.63, Percent Change: +7.30

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