Scotts Miracle-Gro (NYSE:SMG) Tops Q4 Profit Estimates Despite Revenue Miss

The Scotts Miracle-Gro Company (NYSE:SMG) reported its fiscal fourth quarter and full-year 2025 results, delivering a performance that notably surpassed analyst expectations on profitability, even as it fell short on the top line. The market's reaction in pre-market trading appears to reflect a measured assessment of these mixed results, balancing the significant earnings beat against the sales miss and the company's forward-looking guidance.

Earnings and Revenue Versus Estimates

The company's fourth-quarter results presented a tale of two key financial metrics. On the profitability front, ScottsMiracle-Gro demonstrated considerable strength, while its quarterly sales did not meet Wall Street's forecasts.

• Non-GAAP EPS: Reported at -$1.96, significantly better than the analyst estimate of -$2.01.
• Revenue: Came in at $387.4 million, missing the analyst consensus estimate of $400.7 million.

This dynamic suggests that the company's aggressive cost-control measures and operational efficiencies are having a tangible positive impact on the bottom line, even in a quarter that is seasonally weak for the lawn and garden company. The pre-market stock movement indicates investors are weighing the substantial earnings beat against the revenue shortfall.

Fiscal 2025 Full-Year Performance and 2026 Outlook

The earnings release highlighted a year of robust financial improvement for the company. Key full-year achievements that underscore this turnaround include:

• A GAAP gross margin rate of 30.6%, representing an improvement of 670 basis points over the prior year.
• Non-GAAP adjusted earnings per share of $3.74, an increase of $1.45 per share compared to fiscal 2024.
• Free cash flow of $274 million, which exceeded expectations and contributed to a reduction in the company's net leverage ratio.

Looking ahead, management provided guidance for fiscal 2026 that points to continued progress. The outlook calls for:

• U.S. Consumer net sales to see low single-digit growth.
• A non-GAAP adjusted gross margin of at least 32%.
• Non-GAAP adjusted earnings per share in the range of $4.15 to $4.35.
• Free cash flow of approximately $275 million.

This company-provided EPS outlook for fiscal 2026, which centers around $4.25, sits notably above the current analyst sales estimate for the year, indicating management's confidence in its ability to continue expanding profitability. CEO Jim Hagedorn attributed the strong results to "substantial gross margin improvement" and pointed to strategic investments in AI and automation as drivers of future efficiency.

Segment Performance and Strategic Positioning

A deeper look into the company's segments reveals the drivers behind the annual performance. The U.S. Consumer segment, the company's core business, saw net sales of $2.99 billion for the full year, aligning with guidance, and achieved significant segment profit growth. Conversely, the Hawthorne segment, which serves the indoor and hydroponic gardening market, continued to face headwinds with a 44% decline in full-year sales, though it did return to a segment profit for the full year. The company's focus on debt reduction and strengthening its balance sheet was a repeated theme, positioning it with more financial flexibility heading into the new fiscal year.

For a detailed breakdown of historical earnings and future analyst estimates, you can review the data here.

Disclaimer: This article is for informational purposes only and is not intended as investment advice. The information contained herein is based on publicly available sources and should not be the sole basis for any investment decision.