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How Hain Celestial (HAIN) Looks Just Ahead of Q4 Earnings

Zacks Equity Research

The Hain Celestial Group, Inc. HAIN is scheduled to report fourth-quarter fiscal 2019 results on Aug 29, before the opening bell. In two of the trailing four quarters, this food conglomerate underperformed the Zacks Consensus Estimate, recording average negative earnings surprise of 17%. Let’s see what awaits the upcoming quarterly release.

How Are Estimates Faring?

The Zacks Consensus Estimate for earnings in the fiscal fourth quarter stands at 22 cents, implying a decline of approximately 18.5% from the figure reported in the year-ago quarter. The consensus mark remained stable over the past 30 days. The Zacks Consensus Estimate for revenues is $581.1 million, indicating a decline of 6.2% from $619.6 million in the year-ago quarter.

The Hain Celestial Group, Inc. Price and EPS Surprise

The Hain Celestial Group, Inc. Price and EPS Surprise

The Hain Celestial Group, Inc. price-eps-surprise | The Hain Celestial Group, Inc. Quote

Factors to Consider

Hain Celestial is likely to witness dismal sales performance stemming from softness in the United States, the U.K. and Rest of World sales in the fourth quarter. The current Zacks Consensus Estimate for each of these segments also portrays a similar picture.

The Zacks Consensus Estimates for net sales at the United States segment is pegged at $250 million, calling for a decline of approximately 7.4% from the prior-year quarter’s reported figure. The consensus marks for net sales at the U.K. and Rest of World stand at $226 million and $103 million, indicating year-over-year declines of roughly 5.4% and 7.2%, respectively.

Additionally, the company had earlier projected the overall top line to remain soft. Net sales are forecasted to be down year over year for the coming several quarters due to aggressive elimination of uneconomic activities and optimization of its Stock Keeping Units (“SKU”). Notably, Hain Celestial continues to expect net sales from continuing operations in fiscal 2019 to decline 4-6% to $2.32-$2.35 billion.

Nevertheless, the company is making efforts to revert to growth in the United States. In this regard, it is focused on strengthening its core brands to reinvigorate top-line growth, and expand margins and cash flow. It is also eliminating low-margin or underperforming businesses to simplify the portfolio. Keeping in these lines, the company divested the WestSoy Tofu business and concluded the sale of Hain Pure Protein. Notably, cash generation from these divestitures is expected to improve the balance sheet and reduce operating losses.

Further, the company is progressing well with its Project Terra program. Management had earlier forecasted total savings from this program to be roughly $90 million in fiscal 2019. Its SKU rationalization program has helped eliminate SKUs based on lower sales volume or soft margins.  

Hain Celestial’s efforts to reduce uneconomic activities and curtail supply-chain expenses are likely to enhance gross and EBITDA margins. The company has been witnessing sequential adjusted EBITDA margin improvement. For the final quarter, management anticipates sequential improvement in overall adjusted gross margin and adjusted EBITDA margin.

What Our Model Says

Our proven model does not conclusively show that Hain Celestial is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hain Celestial has a Zacks Rank #3 but an Earnings ESP of 0.00%, which makes surprise prediction difficult.

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 an earnings beat:

Casey's General Stores, Inc. CASY has an Earnings ESP of +8.43% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +1.13% and a Zacks Rank #2.

Costco Wholesale Corporation COST has an Earnings ESP of +0.30% and a Zacks Rank #3.

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