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Factors That Hold Key to Hain Celestial (HAIN) Q1 Earnings

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Factors That Hold Key to Hain Celestial (HAIN) Q1 Earnings

Hain Celestial's (HAIN) Project Terra program is likely to improve productivity and facilitate cost reductions. However, any deleverage in freight and commodity expenses may weigh on margins.

Hain Celestial Group, Inc. HAIN is slated to release first-quarter fiscal 2019 results on Nov 8, before the opening bell. In the last quarter, the company delivered a positive earnings surprise of 3.9%. Investors are keeping their fingers crossed and hoping that the company surpasses estimates this time.

How are Estimates Faring?

After registering a bottom-line decrease of 34.1% in the fourth quarter of fiscal 2018, Hain Celestial is likely to record year-over-year decline of 43.5% in the first quarter of fiscal 2019 as well. This is quite evident from the Zacks Consensus Estimate for the quarter under review, which stands at 13 cents compared with 23 cents per share reported in the year-ago quarter. We note that the Zacks Consensus Estimate has remained stable in the past 30 days.

The Zacks Consensus Estimate for revenues is $587.3 million, down roughly 17.1% from the year-ago quarter. We note that total revenues of this New York-based company increased 3% in the last reported quarter.

What the Zacks Model Unveils

Our proven model conclusively shows that Hain Celestial is likely to beat estimates this quarter as the stock has the right combination of the two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hain Celestial has an Earnings ESP of +5.66% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hain Celestial Group, Inc. Price and EPS Surprise

 

The Hain Celestial Group, Inc. Price and EPS Surprise | The Hain Celestial Group, Inc. Quote

Factors Likely to Aid Results

Hain Celestial is on track with its Project Terra program, which is likely to improve productivity and facilitate cost reductions. The project began in fiscal 2016 with an aim to generate worldwide cost savings worth $350 million through fiscal 2020. In doing so, the company plans to optimize plants, co-packers and procurement, along with rationalizing product portfolio. Consequently, it plans to reinvest the additional savings through brand development and household penetration.

Notably, Hain Celestial generated cost savings of nearly $63 million from Project Terra during fiscal 2018 and expects savings of roughly $90-$115 million in fiscal 2019. The company is also divesting its Hain Pure Protein business (which is likely to close in the first half of fiscal 2019) to boost efficiency and simplify brand portfolio.

The company has actively pursued strategic acquisitions to gain market share and expand its base. Now, it plans to expand in India, Middle East and China. In this regard, one of its wholly-owned subsidiaries acquired Clarks UK Ltd., the leading maple syrup and a natural sweetener brand in the United Kingdom. Other notable buyouts include Tilda Limited, a renowned Basmati rice producing company, and Rudi's Organic Bakery, one of the leading organic and gluten-free company. Hain Celestial also acquired some leading packaged grocery brands — Hartley's, Gale's Robertson's, Frank Cooper's and Sun-Pat — from Premier Foods plc. The company also acquired Ella's Kitchen Group Limited that offers organic baby food products under approximately 80 brands.

However, the company is witnessing soft sales in its U.S. segment for the last two quarters. Sales have been partly affected by SKU rationalization efforts. Though the company is making efforts to return its U.S. business to growth, it is likely to take some time. Additionally, escalated freight and commodity expenses along with high SG&A costs may weigh on the company’s margins. Management expects the above-mentioned headwinds to prevail in fiscal 2019.

Other Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat:

Archer Daniels Midland Company ADM has an Earnings ESP of +3.85% and a Zacks Rank of 1.

Lamb Weston Holdings, Inc. LW has an Earnings ESP of +0.48% and a Zacks Rank of 2.

Kellog Company K has an Earnings ESP of +0.09% and a Zacks Rank of 3.

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