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Hain Celestial Q2 Earnings Beat Estimates, Revenues Miss - Analyst Blog

The Hain Celestial Group, Inc. ( HAIN ) posted second-quarter fiscal 2015 earnings of 54 cents a share that came a penny ahead of the Zacks Consensus Estimate and surged 26% from the prior-year quarter. A diversified portfolio of organic and natural brands, rise in consumption, innovative marketing and expanded distribution, helped the company to post healthy numbers in the reported quarter.

However, despite the strong bottom-line performance, the company adopted a cautious stance for its full-year forecast. Nevertheless, on a reported basis, the company's earnings for the quarter came in at 43 cents a share, a penny above the year-ago period figure.

Management stated that strong growth across domestic and United Kingdom operations helped the company to post double-digit sales growth for the 17th straight quarter. Net sales increased 30.2% to $696.4 million but missed the Zacks Consensus Estimate of $720 million. Foreign currency headwinds adversely impacted the sales during the reported quarter. However, adjusting for the recall of nut butter, sales grew 31.2% to $701.7 million.

Net sales in the United States increased 8% year over year to nearly $354 million in the quarter, while net sales in the United Kingdom soared 37.5% to $200.8 million. Operations in the Rest of World segment witnessed a decline of 9.3% in net sales to $55.4 million. Hain Pure Protein Corporation ("HPPC"), which was acquired in Jul 2014, reported net sales of $86.2 million.

We believe that Hain Celestial will sustain the strong momentum and is favorably poised to capitalize on the growing global demand for organic products.

The company registered strong performance across all of its brands, with 20 brands reporting double-digit year-over-year growth and 4 brands recording mid-to-high single-digit growth on a constant currency basis in the quarter. Hain Celestial's top line recorded robust contribution from brands like Sensible Portions, The Greek Gods, Terra, Garden of Eatin', Imagine, Little Bear, WestSoy, Nile Spice, Plainville Farms, Hartley's, Lima, Natumi, Frank Cooper's, Jason, Avalon Organic, Alba Botanica, Rudi's Organic Bakery, FreeBird and Plainville Farms.

Gross profit rose 16.9% year over year to $167.3 million in the quarter. However, as a percentage of sales, it contracted 270 basis points to 24%. Adjusted operating income climbed 30.7% to $87.4 million in the quarter. Moreover, adjusted operating margin remained flat at 12.5%.

Other Financial Details

The company ended the quarter with cash and cash equivalents of $135.2 million, long-term debt (including current maturities) of $875.2 million, reflecting a debt-to-capitalization ratio of 35.1% and shareholders' equity of $1,620.6 million. Cash flow from operating activities in the quarter came in at $52 million, while capital expenditures were $12.5 million. The company generated operating free cash flow of $39.2 million during the quarter.

Guidance

Hain Celestial lowered its fiscal 2015 projection, taking into account foreign currency headwinds, the recall of nut butter and the fire at its Tilda manufacturing facility. Management now anticipates net sales in the band of $2,650-$2,675 million, up 23% to 24% over fiscal 2014. Earlier, the company had projected net sales between $2,725 million and $2,800 million.

Earnings per share are expected to come between $1.85 and $1.89, representing a year-over-year increase of 17% to 19%. The current Zacks Consensus Estimate for the fiscal year stands at $1.87 per share.

Management hinted that net sales in the fourth quarter might be marginally higher than the third quarter, whereas 40%-45% of the earnings are expected to be recorded in the third quarter with the remainder in the final quarter.

Zacks Rank

Hain Celestial currently carries a Zacks Rank #3 (Hold). Better-ranked stocks include SUPERVALU Inc. ( SVU ), sporting a Zacks Rank #1 (Strong Buy), The Kroger Co. ( KR ) and Whole Foods Market, Inc. ( WFM ), both carrying 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 Nasdaq, Inc.


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

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