Hain Celestial's Shares Surge 11% on Fantastic Q4 Earnings - Analyst Blog

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The Hain Celestial Group, Inc. ( HAIN ) ended fiscal 2014 on a high note as the company's fourth quarter yielded historically high revenues. Moreover, adjusted earnings per share of 90 cents from continuing operations grew 39% year over year while beating the Zacks Consensus Estimate by a penny.


The Hain Celestial Group Inc - Earnings Surprise | FindTheBest

On a reported basis, the company's earnings came in at 70 cents per share from continuing operations, up 32% from the prior-year quarter. Impressive quarterly performance led to an 11% rise in the company's stock price during yesterday's trading session.

For full year, adjusted earnings from continuing operations came in at $3.17 per share, a penny ahead of the Zacks Consensus Estimate and up 25% year over year. On a reported basis, earnings per share from continuing operations came in at $2.83, reflecting 12% growth.

Management stated that double-digit growth across domestic and United Kingdom operations helped the company to post record sales for the 14th straight quarter. Sales of $583.8 million increased 26% from the prior-year quarter and came ahead of the Zacks Consensus Estimate of $580 million.

For the fiscal, revenues surged 24.2% to $2,153.6 million and beat the Zacks Consensus Estimate of 2,148 million. This is the first time that company's revenues have crossed the $2 billion mark.

Net sales in the United States increased 13.2% year over year to nearly $323 million in the quarter, while net sales in the United Kingdom increased 65.5% to $200.5 million. Operations in the Rest of World segment witnessed a 5.7% increase in net sales to $60.4 million.

The company registered strong performance across all of its brands, with 19 brands registering double-digit year-over-year growth and 6 brands recording mid-to-high single-digit growth in the quarter. Hain Celestial's top line recorded robust contribution from brands like Sun-Pat, Garden of Eatin', Ella's Kitchen, Danival, Imagine, Lima, Bearitos, The Greek Gods, Linda McCartney, Terra, Spectrum, Robertson's, Earth's Best, Natumi, Frank Cooper's, Cully & Sully, Sensible Portions, Hartley's, Gale's, and Alba Botanica.

The company also experienced solid sales from the Rudi's Organic Bakery, and Tilda brand acquired in the fiscal. Moreover, it added another 200 new products to its shelves globally during the year. Further, Hain Celestial successfully divested its Grains Noirs business and simultaneously terminated some non-core products in Europe in fiscal 2014.

Adjusted gross profit rose 29.6% year over year to $162.1 million in the quarter. Moreover, as a percentage of sales, it expanded 80 basis points (bps) to 27.8%. Adjusted operating income rose 48.7% to $73.9 million in the quarter. Moreover, adjusted operating margin expanded approximately 200 bps to 12.7%.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $123.8 million, long-term debt excluding current maturities of $767.8 million and shareholder equity of $1,619.9 million, reflecting a debt-to-capitalization ratio 32.2%. Free cash flow from operating activities in the fiscal tripled year over year to $143.2 million in the fiscal.

Outlook

We believe that the company will sustain the strong momentum across all business segments and will be favorably poised to capitalize on the growing global demand for organic products.

Guidance

Buoyed by superb quarterly results and taking into account the acquisition of Tilda, Rudi's and Hain Pure Protein Corporation, Hain Celestial provided a robust guidance for fiscal 2015.

The company anticipates sales to come in the range of $2,725-$2,800 million, up 27%-30% from fiscal 2014.  Earnings per share are expected to come between $3.72 and $3.90 representing year-over-year increase of 17% to 23%. The Zacks Consensus Estimate for the fiscal year stands at $3.74 per share, and could witness an upward revision in the coming days.

In addition, the company expects tax rate to be around 32% and capital expenditure to be about $40 million.

Excluding impact from Hain Pure Protein, gross margin is expected to be around 27% to 27.2%, operating margin is anticipated to be in the range of 12% to 12.2% whereas annual selling, general and administrative expenses rate is predicted to be within 15% to 15.1%.

Zacks Rank

Though currently, Hain Celestial carries a Zacks Rank #4 (Sell), we expect an improvement soon given the strong results.

Some better-ranked stocks worth consideration in the food industry include Aramark ( ARMK ), Treehouse Foods, Inc. ( THS ) and Boulder Brands, Inc. ( BDBD ). While Aramark and Treehouse Foods sport a Zacks Rank #1 (Strong Buy), Boulder Brands holds a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: HAIN , BDBD , ARMK , THS

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