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The Scotts Miracle-Gro Co. (NYSE: SMG) is literally and figuratively growing when others aren't. In August, the company announced superior Q3 results of a 9% increase in revenue to $1.28 billion, driven by strong consumer-based sales in almost every lawn and garden category.
More good news: double-digit consumer sales occurred in 45 states. Wall Street has certainly noticed: it's pushed SMG's stock up more than 25% since the spring.
Hence, I'm reiterating my Buy rating for Scotts Miracle-Gro, first recommended on May 20, 2009, at a price of $34.88.
This year, European sales gains are expected to offset any weakness in North America, but so far, the North American weakness has not been nearly as soft as projected. Also, ample market share gains are possible on both continents. The First Call FY2009/FY2010 EPS estimates for SMG are $2.45 to $3.04.
Finally, that $2.45 FY2009 EPS estimate looks slightly conservative, given the company's yearly performance to-date, which is more good news for SMG shareholders.
Stock Analysis: Scotts Miracle-Gro is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in SMG now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your SMG position before December 2009. Sell/stop loss if you were to buy shares in this company: $17.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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