Why Investors Should Stay Away From ScottsMiracle-Gro


CNBC’s Jim Cramer told investors Thursday to resist the urge to add ScottsMiracle-Gro to their portfolios, despite the stock’s low valuation.

“Historically, it’s a great time of year for all things gardening because it’s planting season, and Scotts is a name we used to get a ton of questions about. … But , over the past thirteen months, those shares have been erased,” the “Mad Money” host said.

“While ScottsMiracle-Gro may look cheap on a price-to-earnings basis, the problem is earnings guidance continues to decline…and management has no idea how serious the situation is,” a- he added later.

ScottsMiracle-Gro stock fell 6% on Thursday. The company reported better-than-expected earnings in its previous quarter two days ago.

On Wednesday, JPMorgan upgraded ScottsMiracle-Gro from neutral to overweight, pointing to the stock’s valuation, high margins and market leadership. Stifel downgraded the stock from overweight to held.

Cramer said he agrees with Stifel’s more bearish stance on Scotts, particularly given the company’s struggles with rising gross costs, lack of confidence around an $8 profit target per action and his concerns about the performance of Scotts’ Hawthorne Division. Hawthorne operates in cannabis, an industry that Cramer says has taken a beating over the past year.

“On top of that, Scotts has a bad enough track record that they don’t see management taking an aggressive buyout either. In short, business is bad and there’s not much Scotts can do to improve it,” he said. Cramer said.

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