* Q1 adj EPS $2.15 vs est. $2.06
* Q1 revenue $1.17 bln vs est. $1.20 bln
* Says rising costs squeezing margins
* Shares fall as much as 16 percent
May 8 (Reuters) – Lawn and garden products maker Scotts
Miracle-Gro Co said it may miss its gross margin
forecast for the year because of rising material and
distribution costs and higher spending on promotions, sending
its shares skidding as much as 16 percent.
The warning overshadowed stronger-than-expected
second-quarter earnings.
Prices of urea, which accounts for 7 percent of the
company’s costs of goods sold, are at their highest levels in
four years, SunTrust Robinson Humphrey analyst Bill Chappell
noted in a client report.
Second-quarter net income from continuing operations fell to
$127.2 million, or $2.05 per share, from $148.6 million, or
$2.20 per share, a year earlier.
Sales rose 4 percent to $1.17 billion, helped by increased
sales of fertilizer and pest control products.
Excluding items, the company earned $2.15 per share.
Analysts on average had expected earnings of $2.06 per share
on revenue of $1.20 billion, according to Thomson Reuters
I/B/E/S.
Sales in the company’s largest segment, global consumer —
which makes and sells weed- and pest-control products to
homeowners — increased 3 percent to $1.12 billion.
The Marysville, Ohio-based company reiterated its sales and
profit outlook for the year.
The company had previously expected its gross margin to be
between 35.2 percent and 35.7 percent for the year, company
spokesman Jim King said. Scotts Miracle-Gro did not provide a
new forecast but said it may miss the lower end of that range.
In the second quarter, the gross margin fell to 39.5 percent
from 41.1 percent in the year-ago period.
Oppenheimer analyst Joseph Altobello kept his “perform”
rating on the stock, saying that rising costs were likely to
temper operating income growth at the company.
Shares of the company were down 15 percent at $46.56 in late
morning trading on the New York Stock Exchange on Tuesday.
