The Hain Celestial Group, Inc
) third-quarter fiscal 2013 earnings of 72 cents a share came in
line with the Zacks Consensus Estimate and surged 28.6% from 56
cents earned in the year-ago quarter.
Management cited that strong top-line growth, integration of
acquired businesses, focus on high margin carrying brands, and
elimination of underperforming private label brands facilitated
the bottom-line growth of this Zacks Rank #2 (Buy) stock.
Including one-time items, earnings came in at 85 cents
compared with 52 cents a share earned in the year-ago
Behind the Headline
Net sales rose 21.4% year over year to $456.1 million,
reflecting rise in demand for natural organic products. However,
reported revenues missed the Zacks Consensus Estimate of $484
Net sales in the United States increased 8.3% year over year
on a comparable basis to $277.6 million during the quarter, while
net sales at United Kingdom surged 78.2% to $121.2 million. Rest
of the World, which includes operations in Canada and Europe,
witnessed an 11.3% increase in net sales to $57.3 million.
The company registered elevated consumption in core categories
with robust contribution from Earth's Best, MaraNatha, Spectrum,
The Greek Gods, Imagine, Health Valley, Westbrae, Hain Pure
Foods, Jason, Europe's Best and Linda McCartney. Hain Celestial
also experienced solid sales across recently-acquired brands
including Cully & Sully, Hartley's and BluePrint.
Acquisitions have played a key role in the company's strategy
to build market share. Acquisitions have not only expanded the
company's geographical presence but have 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.
Recently, Hain Celestial acquired Ella's Kitchen Group Limited
that offers organic baby food products under approximately 80
brands and provides them in easy to carry pouches. Management
believes the acquisition to be accretive to the company's
earnings by 5 cents to 8 cents a share in fiscal year 2014. Apart
from this, the company formed Global Infant, Toddler & Kids
Division under Hain Celestial US to be spearheaded by Paul
Lindley, the founder of Ella's Kitchen.
Adjusted gross profit ascended 22.6% year over year to $128.3
million during the quarter, whereas adjusted gross margin
expanded 20 basis points to 28.1% driven by enhanced production
capabilities, service efficiency and the elimination of SKUs that
carry lower margin.
Adjusted operating income jumped 36.7% to $57.6 million in the
quarter, while adjusted operating margin expanded approximately
140 basis points to 12.6%, indicating improved sales mix.
Other Financial Details
The company ended the quarter with cash and cash equivalents
of $27.2 million, long-term debt of $620.3 million with
debt-to-capitalization of 35.7% and shareholders' equity of
$1,115.8 million. Cash flow from operating activities for the
trailing 12-months was $112.1 million and capital expenditures
were $56.5 million, resulting in free cash flow of $55.6
We believe that the company would sustain strong momentum
across entire business segments as it remains well positioned to
capitalize on the growing global demand for organic products.
Alongside, Hain Celestial now anticipates sales in the range
of $1,727 million to $1,734 million in fiscal 2013, reflecting a
year-over-year increase of 26%. Earnings are projected in the
range of $2.43 to $2.47 per share, up 31% to 33% year over
Other Stocks to Consider
Besides Hain Celestial, other stocks that are looking
promising in the food industry include,
Flowers Foods, Inc
) that holds a Zacks Rank #1 (Strong Buy), and
J&J Snack Foods Corp.
), both of which carry a Zacks Rank #2 (Buy). These stocks are
expected to continue with their upbeat performances.
FLOWERS FOODS (FLO): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
J&J SNACK FOODS (JJSF): Free Stock Analysis
KELLOGG CO (K): Free Stock Analysis Report
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