On Monday, Jefferies began its coverage of Scotts Miracle-Gro (NYSE:SMG) with a Hold rating and a price target set at $72.00. According to InvestingPro data, the stock is currently fairly valued, trading near its Fair Value estimate.
The firm acknowledged improvements in the company's management strategies, including supply chain cost optimization, increased retailer support, and refined consumer messaging.
The company has demonstrated commitment to shareholder returns, maintaining dividend payments for 20 consecutive years with a current yield of 3.5%. However, their optimistic view is balanced by several concerns.
The analyst cited ongoing inflation and the ambitions of retailers to expand their private label offerings as potential challenges for Scotts Miracle-Gro. Additionally, the expectation of a growing do-it-for-me (DIFM) market headwind could impact the company's performance.
Despite these challenges, InvestingPro analysis reveals multiple positive indicators for the company. Get access to 5+ additional ProTips and comprehensive financial analysis with an InvestingPro subscription.
Jefferies also noted that increased research and development (R&D) and advertising spending may be necessary to sustain the projected medium-term volume growth of around 1%. These investments are seen as vital for the company to support its growth amidst a competitive landscape.
The firm's price target reflects a cautious stance, with earnings per share (EPS) estimates for fiscal years 2025 and 2026 that are 3-4% below the consensus on Wall Street. This conservative outlook takes into account the various factors that could affect the company's profitability and market position in the coming years.
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