Scotts Miracle-Gro Analyst Sees Tougher Setup For Second Half Of 2019

Scotts Miracle-Gro Co SMG shares cooled off Thursday after a 6-percent jump Wednesday following a stellar second-quarter print.

Notwithstanding the results, fueled by strong Roundup and cannabis supplies sales, Bank of America Merrill Lynch turned bearish on the stock.

The Analyst

Christopher Carey downgraded Scotts Miracle-Gro from Neutral to Underperform but raised the price target from $81 to $83.

The Thesis

Scotts Miracle-Gro's results were solid and confirmed that the 2019 delivery is now de-risked, Carey said in the Thursday downgrade note. (See his track record here.) 

The company commented that it is running ahead of expectations and could raise guidance in June, the analyst said. 

Yet the statement has reset expectations, and the guidance revision — if it comes — will not be a surprise in a month's time, Carey said. 

With tougher comps ahead, expectations for a guidance raise, and the stock's premium valuation, BofA said it struggles to see upside potential versus current levels. 

That's especially true as momentum slows in the second half after the seasonally strong first half, and as the company's priority for cash remains with debt paydown, Carey said. 

The Price Action

Scotts Miracle-Gro shares were up slightly at $90.44 near the end of Thursday's session. 

Related Links:

Raymond James Downgrades Scotts Miracle Gro On Valuation

Raymond James Gives Update On Scotts Miracle-Gro Following CFO Presentation

Photo courtesy of Scotts Miracle-Gro.