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It's been a good week for The Scotts Miracle-Gro Company (NYSE:SMG) shareholders, because the company has just released its latest quarterly results, and the shares gained 4.4% to US$237. It was a solid earnings report, with revenues and earnings both coming in very strong. Revenues were 20% higher than the analysts had forecast, at US$749m, while the company also delivered a surprise statutory profit, against analyst expectations of a loss. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
See our latest analysis for Scotts Miracle-Gro
Following the recent earnings report, the consensus from six analysts covering Scotts Miracle-Gro is for revenues of US$4.37b in 2021, implying a perceptible 3.1% decline in sales compared to the last 12 months. Statutory per share are forecast to be US$8.51, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.29b and earnings per share (EPS) of US$8.38 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 14% to US$243. It looks as though they previously had some doubts over whether the business would live up to their expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Scotts Miracle-Gro, with the most bullish analyst valuing it at US$290 and the most bearish at US$140 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 3.1%, a significant reduction from annual growth of 9.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.0% next year. It's pretty clear that Scotts Miracle-Gro's revenues are expected to perform substantially worse than the wider industry.