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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.

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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.

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