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2 Analysts Leave Hain Celestial's Sell-Side Event Underwhelmed

Jayson Derrick

Food company Hain Celestial Group Inc (NASDAQ: HAIN) hosted a sell-side presentation led by new CEO Mark Schiller that left two Street analysts wanting more insight on the company's strategy and outlook.

The Analysts

BMO Capital Markets' Amit Sharma maintains a Market Perform rating on Hain Celestial Group with a price target lowered from $25 to $23.

Susquehanna Financial Group's Pablo Zuanic maintains a Neutral rating with a price target lowered from $25 to $20.

BMO: 'Hungry For More' 

CEO Schiller explained to the sell-side community what problems its food businesses face, but his list of solutions and timeline for any turnaround was notably light, Sharma said in a research report.

For example, Hain re-emphasized its February commentary that it is looking at ways to streamline the company and transform its products into a more focused portfolio. The company also reiterated its position that "everything is in play," but failed to elaborate further, the analyst said. 

The herbal tea maker "hinted" that its fiscal 2019 EBITDA guidance of $275 million to $300 million and the Street's estimate of $261 million are both too high, Sharma said. The company is now unlikely to offer any fiscal 2020 guidance at its investor day presentation next spring, the analyst said — creating a scenario for the company to surprise the investment community with a potential "earnings reset."

Hain emphasized a "complete alignment" between Schiller and the company's board, taking an outright sale of Hain Celestial "off the table" for at least the next two to three years, according to BMO. 

Related Link: Analyst: As The Food Sector Consolidates, Hain Celestial Could Be Attractive M&A Target

Susquehanna's Takeaways

Hain Celestial's event was more of a "meet-and-greet," since Schiller has been CEO for just six weeks, Zuanic said in a research report.

Activist investor Engaged Capital's Glenn Willing was co-hosting the event; he represents an 11.3-percent stake int the company at an average cost likely in the low-to-mid $30 range, the analyst said. 

CEO Schiller's presentation was encouraging due to its emphasis on the following, Zuanic said: 

  • Reorganizing the corporate structure and supply chain.
  • Diverting resources to categories with growth potential categories.
  • Building out a health and wellness platform.

Yet the event left the analyst less positive on the stock given the following:

  • The new CEO may want to "buy himself some time," so any 2019 guidance is likely unrealistic.
  • The case for a discounted valuation for the stock is justified based on clear portfolio and operational challenges. Any organizational changes and restructuring will take time, and it is not yet clear what the "new" company will look like.
  • Hain's lack of commentary regarding its non-U.S. exposure makes valuing the stock on a sum-of-the-parts basis difficult.

Price Action

Hain Celestial shares were down 7.37 percent at $17.09 at the time of publication Monday. 

Related Link: M&A Speculation May Have Driven Hain Celestial Valuation Too High

Latest Ratings for HAIN

Date Firm Action From To
Dec 2018 BMO Capital Maintains Market Perform Market Perform
Aug 2018 Wells Fargo Maintains Market Perform Market Perform
Aug 2018 Buckingham Maintains Neutral Neutral

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