A leader in natural food and personal care products categories with an extensive portfolio of well-known brands, The Hain Celestial Group Inc. (HAIN) offers investors one of the strongest growth profiles in the industry. The stock is poised to surge once the economy rebounds and demand for healthier and natural food improves.
 
Acquisitions have been a key part of the company’s strategy to increase its market share. Acquisitions have not only expanded the company’s geographical presence but have also provided opportunities to cross-sell products in the U.S., Canadian, and European markets. Hain Celestial leverages its healthy balance sheet to make strategic acquisitions.  
 
To name a few of the company’s recent acquisitions, Hain Celestial added World Gourmet Marketing including its Sensible Portions brand of Garden Veggie Straws, Pita Bites and other snack products. The company also acquired Churchill Food Products Limited that manufactures and distributes food-to-go products in the United Kingdom . The company purchased The Greek Gods brand as well.
 
Complementing its acquisitive streak, the company has also undertaken a number of operational initiatives to improve performance and to put itself on the growth trajectory. Hain Celestial’s Stock Keeping Unit (“SKU”) rationalization program has helped eliminate SKUs based on lower sales volume or weak margins. Management focuses on improving profitability through new product introductions and cutting costs.
 
However, the recent economic downturn and the sluggish financial market have been exerting pressure on consumers’ disposable income, triggering a shift in focus from higher-priced organic products to cheaper private label brands. The lower consumer demand may adversely affect Hain’s top-line growth. The company faces stiff competition from the likes of Kraft Foods Inc. (KFT) and General Mills Inc. (GIS).
 
The company is heavily dependent on retailers and distributors who have been compelled to cut down on inventories given the sluggish economic conditions and the ensuing lackluster demand. This weakness has in turn hurt the company’s top-line growth.
 
Considering the pros and cons at this juncture, we prefer to be Neutral on the stock with a target price of $23.00. However, Hain Celestial holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating, primarily owing to the company’s better-than-expected, fourth-quarter 2010 results.
 
The quarterly earnings of 26 cents a share outdid the Zacks Consensus Estimate of 24 cents, and surged 23.8% from 21 cents delivered in the prior-year quarter. Hain Celestial now expects fiscal year 2011 earnings in the range of $1.24 to $1.31 per share.

 
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