Scotts Miracle-Gro 3Q26: Green Shoots, Muddy Margins

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Scotts Miracle-Gro 3Q26: Green Shoots, Muddy Margins

Idea

July 31, 2026 07:26 PM GMT

Morgan Stanley & Co. LLCMConsumer Credit Research | North America Jenna L Giannelli

Credit Analyst

Scotts Miracle-Gro 3Q26: Green Jenna.Giannelli@morganstanley.comRoopi Bhangu +1 212 761-4340

Roopi.Bhangu@morganstanley.com +1 212 761-1912

Shoots, Muddy Margins

Exhibit 1 : Fundamental & Valuation View

Mixed F3Q for SMG, with sales in line but GM and EBITDA Credit Fundamental View Valuation View Action / Trade

modestly below consensus as commodity and freight costs SMG Neutral Rich Sell '31s

weighed. EPS guidance rose and the broader guide held. We Source: Morgan Stanley Research

maintain our trade rec to sell SMG ’31s at ~133bp OAS, ~34bp

inside BBs & >200bp inside HY Consumer. The equity fell 3.8%

as of market close yesterday; bonds were unchanged.

Key Takeaways

SMG's sales were in line, while adj. GM and adj. EBITDA missed. EPS guidance

rose, but US Consumer sales are now expected at the low end of LSD growth.

We think branded mix is moving in the right direction, with branded products

+4.5% YTD, e-com POS +27%, and ~$100mn of low-margin sales exited.

We expect FY27 GM expansion to depend on pricing, cost-out, and mix offsetting

freight and commodity pressure; the pricing contribution was not disclosed.

Capital allocation is being reset around leverage below 3.5x from 3.78x at F3Q

and measured buybacks, an incrementally better credit posture, though Investor

Day is the next key catalyst.

Valuations remain tight: SMG '31s at ~133bp trade inside BBs (~167bp) and HY

Consumer (~348bp) despite the B2/B+ ratings and limited growth.

Our take on the quarter (=): Mixed F3Q26 print, with sales in line but GM and

EBITDA below consensus. FY26 guidance was mostly maintained and EPS raised.