Being 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 rise as the economy gradually revives and demand for healthier and natural food improves.
Hain Celestial recently posted better-than-expected third-quarter 2011 financial results. The 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.
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 United States, Canadian and European operations as well as recent acquisitions.
The company registered robust contribution from Grocery and Snacks, Celestial Seasonings and Personal Care units with double-digit sales growth witnessed across a series of brands. Hain Celestial also experienced solid sales across recently acquired brands, Sensible Portions snacks and The Greek Gods yogurt.
Hain Celestial had earlier announced a couple of strategic initiatives to enhance its portfolio of global brands by acquiring Danival, the manufacturer of certified organic food products with facilities in France, and GG UniqueFiber, the manufacturer of all natural high fiber crackers in Norway.
Acquisitions have been a key part of Hain Celestial’s strategy to build market share. Not only have they widened the company’s geographical presence, they have also provided opportunities to cross-sell products in the U.S., Canadian, and European markets.
Hain Celestial has undertaken a number of initiatives to improve performance and to put itself on the growth trajectory. The company’s Stock Keeping Unit (“SKU”) rationalization program has helped eliminate SKUs, which had lower sales volume or weak margins. Management focuses on improving profitability through new product introductions and cutting costs.
However, the company faces strong competition in the natural and organic foods market and the personal care products segment. Competition is encountered on several attributes – product quality, brand recognition and loyalty, price, product innovation and promotion. This may dent the company’s sales and margins.
Moreover, 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.
Hain, which competes with General Mills Inc. (GIS) and Kraft Foods Inc. (KFT), currently, holds a Zacks #2 Rank, implying a short-term Buy rating. Besides, the company retains a long-term Neutral recommendation on the stock.
