* Q2 adj EPS $1.80 vs est $1.46
* Q2 rev $1.12 bln vs est $1.01 bln
* Co may announce shr buyback and div rise
* Says cancellation rates down, retention at record high
(Recasts; adds conference call details, analyst comments)
By Nivedita Bhattacharjee
BANGALORE, May 6 Scotts Miracle-Gro Co (SMG.N)
posted better-than-expected quarterly results, and the lawn and
garden products maker said it may go for a share buyback and a
rise in dividend later this year.
The stock's trading volumes jumped to almost double its
10-day average volume Thursday noon on the New York Stock
"Our goal was to get the leverage ratio (on the balance
sheet) below 2.5 times at the end of the year. We're now
tracking ahead of that schedule," Jim Hagedorn, chief executive
officer, said on a call with analysts.
A company executive said, "We currently have a bias for
both share repurchase program and increased dividend."
BGB Securities analyst Sam Yake said with a strong business
in place, and with Scotts repaying debt to its preferred
levels, this is one of the best ways to use the extra cash.
Scotts Miracle-Gro benefitted during the recession as more
people took to stay-at-home hobbies like gardening, and
currently, the company is gaining from a peak lawn season.
S&P Equity analyst Stewart Scharf upgraded the stock to
"buy" from "hold," saying he expects the company's new products
to boost unit volume, while gross margins should benefit from
Scotts has been working on its marketing and supply chains
among other things, to ensure customer retention and growth.
The company said cancellations are down from last year and
customer retention rates are at a record high.
"April alone typically accounts for about 20 percent of
yearly point of sales, with May right behind it," said
Jefferies & Co analyst Douglas Lane, agreeing that the 2010
garden season has started out well for the company.
In the latest second quarter, the company's global consumer
segment, its biggest, posted a 21 percent rise in sales,
driving a 19 percent rise in overall sales.
Scotts, whose products include grass seeds, fertilizers,
herbicides, potting soils and related tools, also forecast
full-year earnings of at least $3.25 per share, topping
Analysts on average were looking at earnings of $3.15 a
share, according to Thomson Reuters I/B/E/S.
The company, which sells its products through retailers
like Home Depot (HD.N) and Lowe's (LOW.N) among others, also
said the outlook assumes sales growth of 7 to 8 percent for the
For the reported quarter, Scotts earned $118.5 million, or
$1.76 per share in the reported quarter, compared with $77.5
million, or $1.18 per share, a year ago.
Excluding items, it earned $1.80 per share, while analysts
were expecting a profit of $1.46 a share.
Revenue at the Marysville, Ohio-based company jumped 19
percent to $1.12 billion, topping estimates of $1.01 billion.
Scotts Miracle shares pared initial gains and were down 35
cents at $47.19 in midday trade on the New York Stock
(Reporting by Nivedita Bhattacharjee; Editing by Unnikrishnan
Nair and Gopakumar Warrier)