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Hain Celestial (HAIN) to Post Q3 Earnings: What's in Store?

Zacks Equity Research

The Hain Celestial Group, Inc. HAIN is scheduled to report third-quarter fiscal 2019 results on May 9, before the opening bell. In the last quarter, the company delivered a negative earnings surprise of 46.2%. In three of the trailing four quarters, this food conglomerate has underperformed the Zacks Consensus Estimate, recording average negative earnings surprise of 23.6%. Let’s see what awaits this quarterly release.

How Are Estimates Faring?

The Zacks Consensus Estimate for earnings in the fiscal third quarter stands at 20 cents, reflecting year-over-year decline of approximately 46%. The consensus mark remained stable over the past 30 days.

We note that in the preceding quarter, adjusted earnings of 14 cents a share declined sharply from 32 cents, recorded in the year-ago period. Lower net sales, and higher interest and other financing expenses negatively impacted the bottom line in the previous quarter.

The Zacks Consensus Estimate for revenues is $593.8 million, indicating a decline of 6.2% from $632.7 million in the year-ago quarter. We note that total revenues of this New York-based company decreased 5% in the last-reported quarter.

The Hain Celestial Group, Inc. Price, Consensus and EPS Surprise

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

Factors Influencing Performance

Hain Celestial is concerned about dismal sales performance stemming from softness in the United States segment, along with sluggishness in the United Kingdom and Rest of World sales. The current Zacks Consensus Estimate for respective segments also portrays a similar picture.

The Zacks Consensus Estimates for net sales at United States segment is pegged at $262 million, reflecting a decline of approximately 6.8% compared to the prior year’s figure. The consensus estimates for net sales at United Kingdom and Rest of World stand at $227 million and $106 million, mirroring year-over-year decline of roughly 4.6% and 6.2%, respectively.

Also, escalated freight and commodity expenses in the United States as well as adverse currency fluctuation remain matters of concern. Any deleverage in cost of sales or SG&A expenses may have a direct bearing on the company’s margins.

Nevertheless, the company is on track to simplify its business — as evident from the divestment of Hain Pure Protein business — and allocate resources toward areas with higher growth potential. Management expects to see improvements in the second half of fiscal 2019 when compared with the first half, on the back of its Project Terra savings plan.

Hain Celestial is well on track with Project Terra, which is aimed at cutting costs and complexity, alongside aiding sales. During the first and second quarters, the company generated cost savings of $60 million and $21 million, respectively, from Project Terra.

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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hain Celestial has a Zacks Rank #4 (Sell) and Earnings ESP of -2.10%. We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks With Favorable Combination

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

United Natural Foods, Inc. UNFI has an Earnings ESP of +33.04% and a Zacks Rank #2.

Campbell Soup Company CPB has an Earnings ESP of +1.80% and a Zacks Rank #3.

Ulta Beauty, Inc. ULTA has an Earnings ESP of +0.25 and a Zacks Rank #3.

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