Scotts Miracle-Gro Shares Struggle to Gain Traction Despite Financial Turnaround

Despite achieving a significant operational recovery in fiscal 2025, Scotts Miracle-Gro Company shares continue to demonstrate weak price performance. The stock remains down more than 13% year-to-date, reflecting persistent investor skepticism even as the company returned to profitability and substantially improved its margins.

The complete fiscal 2025 picture reveals a substantial reversal of fortune for Scotts Miracle-Gro. The company posted net income of $145.2 million, a dramatic improvement over the previous year's loss. Adjusted earnings per share climbed to $3.74, while adjusted EBITDA reached $581 million. This transformation was largely driven by the "Margin Reinvention" strategy, which boosted gross margin by 490 basis points to 31.2%.

Key financial achievements for the year include:
- Adjusted EPS: $3.74 (up from $2.29 year-over-year)
- Free cash flow generation: $274 million (exceeding expectations)
- Gross margin performance: 31.2% (surpassing target)

Quarterly Results Cloud Positive Annual Trend

The company's fourth-quarter performance presented a less optimistic snapshot. Scotts Miracle-Gro reported an adjusted loss of $1.96 per share, worse than the anticipated $1.88 loss. Revenue declined 6.6% to $387.4 million, also missing projections. The Hawthorne segment continues to face substantial challenges, with sales plummeting 38% during the period.

Should investors sell immediately? Or is it worth buying Scotts Miracle-Gro?

This quarterly weakness appears to be overshadowing the stronger full-year results in investors' assessment of the company's prospects.

Forward Guidance and Strategic Initiatives

Looking ahead to fiscal 2026, management projects moderate low-single-digit revenue growth for the U.S. consumer business. The company anticipates achieving an adjusted gross margin of at least 32%, with adjusted EBITDA expected to grow in the mid-single digits. Adjusted earnings per share are forecast between $4.15 and $4.35.

A central component of the recovery strategy involves restructuring the troubled Hawthorne segment through a spin-off and combination with a cannabis entity. This move could generate tax benefits approaching $100 million over coming years. Simultaneously, the company is advancing additional cost reduction measures targeting $75 million in savings for 2026/2027.

Market Response Remains Subdued

The critical question remains whether these strategic moves will be sufficient to reverse the stock's downward trajectory. Despite paying a dividend of $0.66 per share and demonstrating clear operational improvements, Scotts Miracle-Gro shares trade at $56.73 and continue to show weak momentum. The market appears to be maintaining a cautious stance, suggesting the true test of the company's recovery narrative still lies ahead.