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ScottsMiracle-Gro (SMG) Buys Rhizoflora Assets, Boosts Portfolio

ScottsMiracle-Gro (SMG) will substantially acquire all the assets of Rhizoflora for $33.5 million, which will add roughly $8 million to annualized sal...

This story originally appeared on Zacks

The ScottsMiracle-Gro Company SMG recently announced the acquisition of Rhizoflora’s leading nutrients business including its Terpinator and Purpinator brands, further boosting The Hawthorne Gardening Company product portfolio.

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Per the terms of the Rhizoflora deal, the company will acquire all the assets of Rhizoflora for $33.5 million. This will add roughly $8 million to annualized sales. Post the acquisition, Hawthorne will be the primary provider of the Terpinator and Purpinator product lines in the United States.

ScottsMiracle-Gro’s subsidiary, The Hawthorne Collective, purchased a warrant to buy equity in Dewey Scientific for $3.2 million. This will facilitate the advancement of Dewey’s industry-leading cannabis genomics and cultivation. The investment from the Hawthorne Collective will be utilized only for purposes permitted by applicable laws in the United States.

Dewey leverages data science, classical breeding methods and genomics to improve the quality and genetic diversity of cannabis crops in the Pacific Northwest. The Hawthorne Collective funding will enable Dewey to broaden that reach, further refine its cultivation practices as well as work with a wider net of cultivators and partners to deliver higher-yielding crops.

Shares of ScottsMiracle-Gro have declined 8.4% in the past year against 49.4% rise of the industry.

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The company, in its last earnings call, stated that it continues to expect sales in the Hawthorne segment for fiscal 2021 to rise 40-45%. U.S. Consumer sales growth guidance has also been reaffirmed at 7-9%.

The gross margin rate is now projected to decline 250-275 basis points (bps) year over year. The company also expects adjusted EPS in the range of $9.00-$9.30 for full year.

The company noted that the persistent from commodity prices is likely to result in a lower gross margin rate than what it had expected in its earlier guidance in June. However, the company is evaluating offsets to that pressure, which will help it maintain earnings guidance on a full-year basis.


Zacks Rank & Key Picks

ScottsMiracle-Gro currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Nucor Corporation NUE, Dow Inc. DOW and Cabot Corporation CBT.

Nucor has a projected earnings growth rate of around 489.2% for the current year. The company’s shares have surged 161.1% in a year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dow has an expected earnings growth rate of around 403.01% for the current year. The company’s shares have gained 39.5% in the past year. It currently carries a Zacks Rank #2 (Buy).

Cabot has an expected earnings growth rate of around 138.5% for the current fiscal. The company’s shares have rallied 38.9% in the past year. It currently holds a Zacks Rank #2.

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