Buoyed by impressive third-quarter 2012 results and an
optimistic outlook, we have adopted a bullish stance on
The Hain Celestial Group Inc.
). We upgraded our recommendation to Outperform from Neutral with a
target price of $55.00.
Fabulous Quarter, Upbeat Guidance
Rise in consumption, innovative marketing and expanded
distribution facilitated Hain Celestial to post third-quarter 2012
earnings of 54 cents a share that surpassed the Zacks Consensus
Estimate of 50 cents. The reported earnings jumped 50% from 36
cents a share delivered in the prior-year quarter.
Higher demand for natural organic products proved to be a boon
for the company, as the quarterly revenue rose 31.5% year over year
to $379.4 million. However, including sales of the United Kingdom
private label chilled ready meals operations (discontinued
business), revenue came in at $400.3 million, up 39% year over
year. The Zacks Consensus Estimate was $405 million for the
Buoyed by better-than-expected bottom-line results management
raised its fiscal 2012 earnings guidance in the range of $1.76 to
$1.80 per share from its previous guidance of $1.63 to $1.73. The
company now expects sales to be in the range of $1.40 billion to
$1.41 billion, reflecting adjustment for the discontinued
operations of private label chilled ready meals.
A Healthy Option for Wealth
A leader in natural food and personal care products categories
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 surge as the economy gradually
revives and appetite for organic foods gets bigger.
Hain Celestial continues to remain a healthy option for the
investors. Shares of the company have portrayed an upward trend so
far this year, giving a return of 45.9% considering the last traded
price of $53.02 on June 27, moving closer to its 52-week high of
The Company Counts Upon
We believe that the company remains well positioned to
capitalize on the growing global demand for organic products.
During the third-quarter 2012 earnings call, management hinted that
consumption in the U.S. grew 9% with an 11% growth witnessed in
sales, which is quite a good number in this scenario.
The company registered increased consumption in core categories
with robust contribution from Earth's Best, Celestial Seasonings,
Imagine, MaraNatha, Garden of Eatin', Sensible Portions, The Greek
Gods, and JASON brands. Hain Celestial also experienced solid sales
across recently-acquired brands.
Acquisitions have been a key part of the company's strategy to
build market share. Not only did buyouts expand Hain Celestial's
geographic reach, but also brought in opportunities to cross-sell
its products in the U.S., Canadian, and European markets. Notably,
a healthy balance sheet enables the company to target strategic
Following its growth plan, Hain Celestial completed the
acquisition of U.K.-based marketer and manufacturer of fresh and
frozen foods, Daniels Group ("Daniels"). Adding to the string, the
company announced the acquisition of Cully & Sully Limited in
Ireland. The acquisition is expected to amplify the sales of the
company as it provides a gateway to a sturdy food and grocery
market that is swiftly gaining ground.
Moreover, Hain Celestial has undertaken a number of initiatives
to improve its performance and has put itself on the growth
trajectory. The company's Stock Keeping Unit ("SKU")
rationalization program has helped to eliminate SKUs, which had
lower sales volume or weak margins. Management focuses on improving
profitability through new product introductions while reducing
Holds Zacks #1 Rank
The company's strong fundamentals and favorable outlook are
compelling even in a volatile market. Hain Celestial, which
General Mills Inc.
Kraft Foods Inc.
), holds a Zacks #1 Rank that translates into a short-term 'Strong
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