J.P. Morgan Raises SMG 2012 EPS Projection

Scotts Miracle-Gro Company's (NYSE: SMG) $500 million stock repurchase plan, which was to be executed over a four-year period from F2011 to F2014, is likely to be mostly carried out by the end of F2011, J.P. Morgan reports.

“Scotts intends to use the entire $190 million in net proceeds from the Global Pro divestiture for stock repurchase,” J.P. Morgan writes. “The company plans to buy back 6.1 million shares (roughly a $335 million expenditure) in F2011.

“It intends to repurchase 1-2 million shares annually to offset the dilutive effects of options in subsequent years. Assuming the company makes good on its intentions, its shares outstanding would decrease to roughly 63 million shares in F2012 from 67.6 million shares in 2010 or (7%).

“Accordingly, we increased our 2012 EPS projection for Scotts from $4.20 to $4.25 to account for lower shares outstanding. Scotts has accelerated the timing of its share repurchase efforts, in our opinion, due to its above-average level of sustainable free cash generation.”

Scotts Miracle-Gro Company currently trades at $53.33.