Hain Q1 Earnings Came a Penny Ahead
Strong sales performance led The Hain Celestial Group, Inc. (HAIN) to come up with better-than-expected first-quarter fiscal 2014 results. The company’s adjusted quarterly earnings of 52 cents per share came a penny ahead of the Zacks Consensus Estimate and rose 26.8% year over year. On a reported basis, earnings from continuing operations increased 35.7% to 57 cents.
Management stated that a healthy industry trend, consumer demand and new products facilitated the company to post the highest quarterly sales. The top line rose 32.7% to $477.5 million and surpassed the Zacks Consensus Estimate of $470.0 million.
Net sales in the United States increased 23.5% year over year to $312.0 million in the quarter, while net sales in the United Kingdom increased 96.7% to $114.0 million. Operations in Rest of World segment witnessed a 4.6% increase in net sales to $51.5 million.
The company registered increased consumption in core categories with robust contribution from Earth's Best, Sensible Portions, Spectrum, The Greek Gods, Imagine, Arrowhead Mills, Hain Pure Foods, Bearitos, Lima, Danival, Natumi and Linda McCartney. Hain Celestial also experienced solid sales across new brands acquired after first-quarter fiscal 2013 including Hartley's, Sun-Pat, Gale's, Robertson's and Frank Cooper's.
Adjusted gross profit rose 25.9% year over year to $119.8 million in the quarter. However, as a percentage of sales, adjusted gross margin contracted 140 basis points (bps) to 25.1% due to increased input costs, partially offset by price increases and few productivity initiatives. Adjusted operating income rose 30.7% to $43.0 million in the quarter. Nevertheless, adjusted operating margin contracted approximately 10 bps to 9.0%.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $65.1 million, long-term debt excluding current maturities of $641.2 million, reflecting a debt-to-capitalization of 33.4% and shareholders’ equity of $1,280.3 million. Cash flow from operating activities for the quarter was $53.6 million and capital expenditure was $12.3 million, resulting in free cash flow of $41.3 million.
Outlook
We believe that the company will sustain the strong momentum across entire business segments and be well positioned to capitalize on the growing global demand for organic products.
Alongside, Hain Celestial reaffirmed its outlook for fiscal 2014. The company continues to anticipate sales in the range of $2,025 million to $2,050 million in fiscal 2014, marking a year-over-year increase of 17%. Earnings per share are reiterated in the range of $2.95 to $3.05, up 16% to 20% year over year. The Zacks Consensus Estimate for the fiscal year stands at $3.02 per share. Further, Hain Celestial provided its earnings guidance range for the first half of fiscal 2014 at $1.37–$1.42 per share.
Other Stocks to Consider
Until any further upward revision in the Zacks Rank of Hain Celestial, other stocks that look promising in the food industry include Pinnacle Foods Inc. (PF), The J. M. Smucker Company (SJM) and Treehouse Foods, Inc. (THS). All of these carry a Zacks Rank #2 (Buy).
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