When the grass isn’t always greener…
Back in mid-July, I footnoted Scott’s Miracle-Gro (SMG) for what seemed like an unusual string of management changes: quick departures of top executives with no stated reason — not even personal reasons. At the time, the stock was trading at around $43 a share. I put the list on my “short watch” list, which is an internal list that I maintain to test out some of my theories. Just to be clear: I did not short the stock. This was merely a hypothetical. But over the next month, it climbed to $48, so I figured I was wrong.
Fast forward to yesterday when Scott’s reported earnings for the fourth quarter. While the loss was lower and earnings met estimates, the company’s warning about 2008 earnings caused the stock to decline by 16%. I just listened to part of yesterday’s call — the Q&A part which is always the most interesting because it’s unscripted — and liked the line about how the company had adopted a “warrior’s budget”. There were other interesting details, like the fact that urea prices have surged to over $400/ton. Who knew? And then, at the very end, there was a question about the progress on filling the COO spot.
So is it time to take Scott’s off my list? I’m not quite ready to do that, based on some of the things that were said during the call. But the thoughtful answers to some of the questions made me much less cynical than I was a few months ago when the answers weren’t quite as forthright.