The Hain Celestial Group Inc. (HAIN), which distributes, markets and sells various natural and organic foods as well as personal care products, recently posted better-than-expected third-quarter 2011 financial results.
Street analysts had over a week to ponder on the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.
Earnings Report Review
Hain Celestial’s quarterly earnings of 36 cents a share beat the Zacks Consensus Estimate of 34 cents, and climbed 38.5% from 26 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 38 cents compared with 6 cents a share earned in the year-ago quarter.
Revenue in the quarter increased by 29.8% to $288.4 million from $222.1 million delivered in the prior-year quarter, and also came well ahead of the Zacks Consensus Estimate of $263 million. Hain Celestial was able to post healthy sales aided by the United States, Canadian and European operations as well as recent acquisitions.
Hain Celestial now expects total revenue between $1,095 million and $1,115 million, and earnings in the range of $1.30 to $1.34 per share for fiscal 2011. Earlier, the company had forecast revenue between $1,060 million and $1,080 million, and earnings between $1.24 and $1.31 per share.
(Read our full coverage on this earnings report: Hain Celestial Tops Estimate)
Agreement of Estimate Revisions
Clearly, a positive sentiment is palpable among analysts, who remain optimistic about Hain Celestial’s performance. Following the earnings release, the Zacks Consensus Estimates have been rising with analysts remaining bullish on the stock given stronger-than-expected third-quarter 2011 financial results, and an upswing in guidance.
In the last 30 days, 5 out of 11 analysts covering the stock increased their estimates with none lowering their projections for fourth-quarter 2011. For first-quarter 2012, only 1 analyst revised the estimate in the upward direction, and none lowered their estimates.
For fiscal 2011 and 2012, 8 and 7 analysts, respectively, have increased their estimates in the last 30 days, with none revising their estimates downward.
Magnitude of Estimate Revisions
For fourth-quarter 2011, the Zacks Consensus Estimate jumped by a penny to 33 cents and for first-quarter 2012 it inched up by a penny to 32 cents a share in the last 30 days.
In the last 30 days, the Zacks Consensus Estimate for fiscal 2011 and 2012 rose by 4 cents to $1.33 and $1.52 per share, respectively.
The estimates in the current Zacks Consensus for fourth-quarter 2011 range from a low of 31 cents to a high of 35 cents a share. For fiscal 2011, the estimates range from $1.30 to $1.37.
Hain Celestial in Neutral Lane
A leader in natural food and personal care products categories with an array of well-known brands, Hain Celestial offers investors one of the strongest growth profiles in the industry. The company’s strategic investments, and sustained efforts to contain costs, increase productivity and enhance cash flows and margins, have enabled it to deliver healthy results.
Acquisitions have been also a key part of the company’s strategy to build market share, which 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. A healthy balance sheet enables the company to target strategic acquisition opportunities.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their disposable income triggering a shift in focus from higher priced organic products to cheaper private label brands. This may adversely affect Hain’s top-line growth.
Moreover, the company faces strong competition in the natural and organic foods market and the personal care products segment. Big players such as Kellogg Company (K), Kraft Foods Inc. (KFT), Sara Lee Corporation (SLE) and General Mills Inc. (GIS), who have large resources, could dent the company’s sales and margins.
Currently, we have a long-term ‘Neutral’ rating on the stock. However, Hain Celestial holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
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