Why investors should stay away from ScottsMiracle-Gro

CNBC’s Jim Cramer on Thursday urged investors to resist the urge to add ScottsMiracle-Gro to their portfolios, despite the stock’s low valuation.

“Historically, this is a great time of year for everything garden-related because it’s planting season, and Scott’s is a name we used to get a lot of questions about. … But over the last thirteen months, these shares have been wiped out. “said” Mad Money “-verten.

“While ScottsMiracle-Gro may seem cheap on a cost-to-earnings basis, the problem is that earnings forecasts are steadily declining … and management has no control over how bad it will be,”[ads1]; he added later.

ScottsMiracle-Gro shares fell 6% on Thursday. The company reported better-than-expected earnings in the previous quarter two days earlier.

JPMorgan upgraded ScottsMiracle-Gro to overweight from neutral Wednesday, indicating the stock’s valuation, high margins and market leadership. Stifel downgraded the stock from overweight to hold.

Cramer said he agrees with Stifel’s more bearish stance on Scotts, especially due to the company’s struggling rising costs, lack of confidence in a $ 8-per-share earnings target and his concerns about Scotts’ Hawthorne division performance. Hawthorne operates cannabis, an industry that Cramer says has been shut down in the past year.

“On top of that, the Scotts have an ugly enough balance that they also do not see the management embracing an aggressive buyback. In short, the business is bad and there is not much the Scotts can do to make it better,” Cramer said.

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