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 second-quarter 2011 financial results.
The quarterly earnings of 39 cents a share beat the Zacks Consensus Estimate of 37 cents, and climbed 39.3% from 28 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 37 cents a share, up 37% from 27 cents earned in the year-ago quarter.
Quarterly Performance
Revenue in the quarter increased by 20.6% to $291.9 million from $242 million delivered in the prior-year quarter, and also came well ahead of the Zacks Consensus Estimate of $273 million. Hain Celestial was able to post healthy sales aided by United States, Canadian and Continental European operations as well as recent acquisitions.
Hain Celestial had previously acquired 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, manufacturer and distributor of food-to-go products in the United Kingdom. Additionally, the company purchased The Greek Gods brand.
The company most recently announced the acquisition of 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. These acquisitions will be accretive to fiscal 2012 earnings.
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.
We believe that with an extensive portfolio of well-known brands, Hain Celestial 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. The reported quarter witnessed growth in U.S. consumption for natural organic foods.
Despite a 20% rise in cost of sales, gross profit soared 22.2% to $85.4 million in the quarter, whereas gross profit margin expanded to 29.3% from 28.9% in the prior-year quarter. On an adjusted basis, gross profit margin increased 46 basis points to 29.4%, reflecting sales of higher margins products and cost-containment efforts.
Financial Aspects
Hain Celestial generated operating free cash flow of $59.6 million for the 12-month period ended December 31, 2010. The company ended the quarter with cash and cash equivalents of $26.3 million and long-term debt of $240.1 million, with debt being 29.7% of shareholders’ equity of $807.2 million. Capital expenditures for the quarter were $2.2 million.
Guidance
Hain Celestial reiterated its fiscal 2011 earnings guidance range of $1.24 to $1.31 per share. However, the company revised its revenue forecast and now expects it between $1,060 million and $1,080 million, up from $1,025 million to $1,050 million earlier projected.
The current Zacks Consensus Estimate for fiscal 2011 is $1.27, which is supported by 11 analysts, and dovetails with the company’s guidance range.
Currently, we have a long-term “Neutral” rating on the stock. Hain Celestial, which competes with General Mills Inc. (GIS) and Kraft Foods Inc. (KFT), holds the Zacks #3 Rank, which translates into a short-term ‘Hold’ rating, and correlates with our long-term view.
GENL MILLS (GIS): Free Stock Analysis Report
HAIN CELESTIAL (HAIN): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
Zacks Investment Research
