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Thursday, May 19, 2022

Here's why Jim Cramer is warning buyers to steer clear of ScottsMiracle-Gro

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CNBC’s Jim Cramer on Thursday informed buyers to withstand the urge so as to add ScottsMiracle-Gro to their portfolios, regardless of the inventory’s low valuation.

“Historically, this is a great time of year for anything garden related because it’s planting season, and Scotts is a name that we used to get a ton of questions about. … But, over the past thirteen months, these shares have been obliterated,” the “Mad Money” host mentioned.

“While ScottsMiracle-Gro might seem cheap on a price to earnings basis, the problem is that the earnings forecast keeps coming down … and management doesn’t have a handle on how bad it’s going to get,” he later added.

ScottsMiracle-Gro inventory fell 6% on Thursday. The firm reported better-than-expected earnings in its earlier quarter two days earlier than.

JPMorgan upgraded ScottsMiracle-Gro to chubby from impartial on Wednesday, pointing to the inventory’s valuation, excessive margins and market management. Stifel downgraded the inventory from chubby to carry.

Cramer mentioned that he agrees with Stifel’s extra bearish stance on Scotts, notably due to the corporate’s struggles with rising uncooked prices, insecurity concerning an earnings goal of $8 a share and his issues with the efficiency of Scotts’ Hawthorne division. Hawthorne operates in hashish, an trade Cramer says has been overwhelmed down for the final 12 months.

“On top of that, Scotts has an ugly enough balance sheet that they don’t see management embracing an aggressive buyback, either. In short, business is bad and there’s not much Scotts can do to make it better,” Cramer mentioned.

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