Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong growth stocks can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - Central Garden (CENT) is currently highlighted as a recommended growth stock by the Zacks Growth Style Score system, which evaluates a company's genuine growth potential [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong investment potential [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth being particularly desirable [4] - Central Garden's projected EPS growth for this year is 17.9%, significantly outperforming the industry average of 1% [5] Group 3: Cash Flow Growth - High cash flow growth is essential for growth-oriented companies, allowing them to fund new projects without relying on external financing [6] - Central Garden's year-over-year cash flow growth stands at 8.7%, compared to an industry average of -3.8% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 11.4%, exceeding the industry average of 9% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions are correlated with stock price movements [8] - The current-year earnings estimates for Central Garden have increased by 0.4% over the past month, indicating a favorable outlook [8] Group 5: Investment Positioning - Central Garden has achieved a Zacks Rank 1 (Strong Buy) due to overall positive earnings estimate revisions and has a Growth Score of B [10] - This combination positions Central Garden favorably for potential outperformance, making it an attractive option for growth investors [10]

The market expects Central Garden (CENT) to deliver a year-over-year increase in earnings on lower revenues when it reports results for the quarter ended June 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be release ...

Financial Data and Key Metrics Changes - Year-to-date EBITDA increased by 9%, and EPS rose by 24% [11][58] - Gross margin improved to above 30%, with a GAAP gross margin rate of 33.7% compared to 28% in the prior year [57][60] - Total company net sales for the third quarter were $1.19 billion, down 1% year-over-year, while year-to-date total net sales were $3.03 billion, a decline of 3.6% [50][62] Business Line Data and Key Metrics Changes - U.S. Consumer net sales for the quarter were $1.03 billion, a 1% increase year-over-year, and year-to-date sales were $2.68 billion, down 1% [45][46] - POS units across categories were up 8% year-to-date, with notable increases in soils (+12%), mulch (+8%), and grass seed (+16%) [11][52] - The branded lawn fertilizers saw a 1% increase in POS units year-to-date, reversing a multi-year downward trend [52] Market Data and Key Metrics Changes - The lawn and garden market grew approximately 5% year-to-date, with the company gaining 2% market share [80] - E-commerce sales increased by 54% in online POS unit sales, reflecting a strong push to engage consumers through digital channels [24][51] Company Strategy and Development Direction - The company is focusing on internal initiatives to improve cost structure and efficiency while also shifting towards outward-facing initiatives to enhance consumer engagement [7][9] - Plans include expanding marketing efforts to younger consumers through digital platforms and influencers, as well as enhancing the R&D pipeline with more natural and organic solutions [21][25] - The company aims for sustained U.S. Consumer sales growth averaging 3% annually, with a gross margin target of 35% or higher [38][63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving EBITDA guidance and reaffirmed expectations for top and bottom line metrics despite weather challenges [10][11] - The company is optimistic about the lawn and garden category's growth and the strength of its consumer business, emphasizing the importance of partnerships with retailers [35][94] - Management highlighted the positive impact of recent tax policy changes on future cash tax benefits, allowing for further investment in the business [60] Other Important Information - The company is in the process of divesting its Hawthorne business, which has shown three consecutive quarters of profitability [36][49] - The company plans to take pricing in the upcoming fiscal year to support margin recovery and innovation investments [39][63] Q&A Session Summary Question: Pricing and price mix performance in '25 and strategy for '26 - Management indicated a pricing increase of just under 1.5% in '25, with plans to pursue further pricing adjustments in '26 while maintaining activation spending with retail partners [77][78] Question: Category growth at retail in '25 and comparison to company performance - The lawn and garden market has grown about 5% year-to-date, with the company gaining approximately 2% market share [80] Question: Performance of customers who engaged in traffic-driving strategies - Management noted that retailers who actively participated in promotional programs saw better performance, and future spending will focus on those retailers [84][86] Question: Visibility into achieving mid-30s gross margin over the next few years - Management outlined a phased approach to improving gross margin, targeting a 1% benefit from supply chain savings and another 1% from net pricing adjustments [90][91]

Financial Data and Key Metrics Changes - Year-to-date EBITDA increased by 9%, and EPS rose by 24% [9][53] - Gross margin is above 30%, with a GAAP gross margin rate of 31.8% compared to 29.5% in the prior year [52][50] - Total company net sales for the third quarter were $1,190 million, down 1% from $1,200 million a year ago [46] Business Line Data and Key Metrics Changes - POS units across categories are up 8% year-to-date, with branded lawn fertilizers POS units up 1% [9][48] - Soils POS units increased by 12%, mulch by 8%, and grass seed by 16% year-to-date [9][48] - Hawthorne net sales were $31 million for the quarter, down from $68 million in the prior year [45] Market Data and Key Metrics Changes - U.S. Consumer net sales for the quarter were $1,030 million, an increase of 1% year-over-year [41] - The lawn and garden market has grown about 5% year-to-date, with the company gaining about 2% market share [74][75] - E-commerce sales increased by 54% in online POS unit sales [22] Company Strategy and Development Direction - The company is focusing on internal initiatives to improve cost structure and efficiency while also shifting to outward-facing initiatives to enhance consumer engagement [6][7] - Plans to invest in technology, AI, and automation to drive operational efficiencies [57][16] - The transformation initiative aims to create a world-class consumer goods company and expand marketing efforts to younger consumers [17][21] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed EBITDA guidance and expects to deliver on top and bottom line metrics [8] - The company is optimistic about the lawn and garden category's growth and its ability to capture market share [62][88] - Management highlighted the importance of partnerships with retailers and the positive outlook for the lawn and garden market [32][66] Other Important Information - The company plans to take pricing in the next fiscal year to help drive margins [36] - The transformation of the lawns business is underway, focusing on a revamped product line and new media strategies [26][29] - The company is committed to sustainability and meeting consumer demands for organic and natural products [23][19] Q&A Session Summary Question: What is the pricing strategy for '26? - The company took a pricing increase of just under 1.5% in '25 and plans to pursue pricing in '26, considering commodity costs [71][72] Question: What is the category growth at retail in '25? - The lawn and garden market has grown about 5% year-to-date, with the company gaining about 2% of that share [74][75] Question: How are retailers responding to the activation strategy? - Retailers that engaged with the company's activation strategy saw relative outperformance, and the company plans to continue investing in those partnerships [79][80] Question: What is the visibility into achieving mid-30s gross margin? - The company expects to achieve mid-30s gross margin through supply chain savings and net pricing strategies over the next few years [85][86]

Core Insights - The Scotts Miracle-Gro Company (SMG) has reaffirmed its fiscal 2025 guidance, indicating strong performance during the peak lawn and garden season with consistent year-over-year growth in consumer point-of-sale (POS) units and dollars [1][8] Financial Performance - The company expects a decline in interest expense by approximately $30 million compared to the previous year, an increase from the earlier forecast of $15-$20 million [2] - SMG has revised its projected increase in share count to about 1 million, down from the prior estimate of 2 million [2] - Adjusted earnings per share are anticipated to be at least $3.50, representing a 53% increase over the previous year [2] - The company projects adjusted EBITDA to range between $570 million and $590 million, with an expected adjusted gross margin of around 30% [4][8] - SMG aims to generate approximately $250 million in free cash flow for the fiscal year [4][8] Market Position - During the peak season, SMG has achieved favorable results, reflecting a resilient consumer base and effective marketing efforts, reinforcing confidence in meeting full-year outlooks [3] - The company is on track to improve its debt profile, aiming for a leverage goal of below 3.5 by the end of fiscal 2027 [3] Stock Performance - SMG's shares have decreased by 4.7% over the past year, contrasting with a 0.8% growth in its industry [5]

Core Insights - Scotts Miracle-Gro Company will participate in the William Blair 45th Annual Growth Stock Conference on June 5, 2025, in Chicago [1][2] - The company is a leader in branded consumer lawn and garden products, with approximately $3.6 billion in sales [3] Company Overview - Scotts Miracle-Gro is the world's largest marketer of branded consumer products for lawn and garden care, with well-known brands such as Scotts®, Miracle-Gro®, and Ortho® [3] - The company's subsidiary, The Hawthorne Gardening Company, specializes in indoor and hydroponic growing products [3]

Core Insights - The Scotts Miracle-Gro Company (SMG) reported a second-quarter fiscal 2025 profit of $217.5 million or $3.72 per share, a 38% increase from $157.5 million or $2.74 per share in the prior-year quarter [1] - Adjusted earnings were $3.98 per share, surpassing the Zacks Consensus Estimate of $3.95 [1] Financial Performance - Net sales for the fiscal second quarter were $1,421 million, missing the Zacks Consensus Estimate of $1,498.2 million, and reflecting a year-over-year decline of approximately 6.8% [2] - U.S. Consumer division net sales decreased by 5% year over year to $1,311.5 million, falling short of the estimate of $1,373.2 million, while the segment recorded a profit of $392.5 million, up 2% year over year [3] - The Hawthorne segment's net sales plummeted 51% year over year to $32.7 million, missing the estimate of $70.4 million, and reported a loss of $0.9 million, which was an improvement from a loss of $3.4 million in the previous year [4] - The other segment's net sales fell 3% year over year to $76.8 million, exceeding the estimate of $62.3 million, and reported a profit of $9 million, up 41% [4] - At the end of the fiscal second quarter, cash and cash equivalents were $16.9 million, down around 74% year over year, while long-term debt decreased roughly 9.7% to $2,493.2 million [5] Outlook - The company reiterated its guidance for U.S. Consumer segment net sales, adjusted gross margin, adjusted EBITDA, and free cash flow, but has ceased issuing full-year revenue guidance for the Hawthorne segment due to ongoing uncertainty in the cannabis business [6] Stock Performance - SMG's shares have declined by 23.7% over the past year, compared to a 10.1% decline in its industry [7] Zacks Rank - SMG currently holds a Zacks Rank 3 (Hold), with better-ranked stocks in the basic materials space including Hawkins, Inc. (HWKN), SSR Mining Inc. (SSRM), and Coeur Mining (CDE) [8]

Financial Data and Key Metrics Changes - Total company net sales for Q2 2025 were $1.42 billion, down 7% from $1.53 billion a year ago [40] - U.S. Consumer net sales decreased 5% to $1.31 billion from $1.38 billion, attributed to a slower start to the lawn and garden season and non-repeating sales from the previous year [40] - Year-to-date total net sales were $1.84 billion, down 5% from $1.94 billion [41] - Adjusted EBITDA for Q2 improved to $403 million from $396 million, with a year-to-date increase of $36 million to $407 million [49] - GAAP net income for Q2 was $217.5 million or $3.72 per share, compared to $157.5 million or $2.74 per share a year ago [50] Business Line Data and Key Metrics Changes - The Garden business saw a 16% increase in POS units, while the Mulch business experienced a 46% increase [12] - POS units overall increased by 12.1%, with notable growth in mulch, soils, fertilizer, grass seed, and controls [42] - Hawthorne net sales declined 51% to $33 million, reflecting market softness and strategic exit from low-margin distribution [41] Market Data and Key Metrics Changes - The company reported that 75% of consumers view lawn and garden care as essential, with 25% planning to shift to DIY this year [25] - Retailers are heavily promoting the company's products, which has positively impacted market share [21] Company Strategy and Development Direction - The company is focused on transforming its cost structure and improving productivity, aiming for $150 million in supply chain cost savings by fiscal 2027 [29] - A strategic divestiture of the Hawthorne business is underway to reduce volatility and improve gross margins [27] - The company plans to roll out changes in product packaging and formulations in fiscal 2026 and 2027 to better meet consumer needs [18] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed full-year EBITDA guidance of $570 million to $590 million, citing strong consumer takeaway and market share gains [7] - The company remains confident in its ability to navigate the current macroeconomic environment, with minimal exposure to tariffs [23] - Management expressed optimism about the resilience of the consumer base, noting that homeowners have more disposable income [25] Other Important Information - The company has achieved a nearly 500 basis point recovery in gross margin, with a target of 30% gross margin rate by fiscal year-end [46] - The company has reduced debt and interest expenses, with total debt down $270 million year-over-year [49] Q&A Session Summary Question: Can you explain the difference between the 12% growth in units and the low single-digit growth in dollars? - Management indicated that the difference is largely due to a mix of product types and heavy retailer promotions driving unit sales, while dollar growth is slower due to pricing strategies [56][60][62] Question: What is the impact of consumers trading down to DIY? - Management views this as a potential positive, as many consumers take pride in gardening and may find DIY solutions more cost-effective [72][74] Question: What is the pricing gap between the company's products and private labels? - Management noted that the pricing gap remains around the historical 20% to 30%, but promotional activities have helped close this gap [78][82] Question: Is there a risk of pantry loading among consumers? - Management does not see significant risk of pantry loading, citing strong early season performance and new consumer engagement [85][89] Question: What is the outlook for Hawthorne's EBITDA guidance? - Management did not adjust the total company EBITDA guidance despite Hawthorne's underperformance, citing strong gross margin improvements and cost-saving measures [90][92]