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The Hain Celestial Group, Inc. HAIN remains in good shape, thanks to its robust strategic endeavors. The company is smoothly progressing on its transformation strategy to deliver sustainable profits. The transformation plan is aimed at simplifying portfolio, identifying additional areas of productivity, driving top-line growth and improving cash flow. Meanwhile, well-chalked innovations, marketing, and assortment-optimization efforts have been supporting the company’s top line.
Defining Hain Celestial’s strategic efforts further, it is focused on boosting automation capabilities in plants for lowering costs, optimizing infrastructure, redesigning engineered products, and optimizing pricing. Moreover, the company is benefiting out of supply-chain productivity endeavors and higher product mix on stock-keeping unit rationalization efforts. In addition, management targets strategic acquisition opportunities, which are likely to result in incremental sales, along with providing the company a strong foothold in the packaged food and grocery space.
While making investment in core brands, Hain Celestial is simultaneously on track to simplify business via exiting non-strategic brands. Over the past 20 months, Hain Celestial sold or shut down 17 non-strategic businesses, resulting in collective sales of more than $900 million and EBITDA of less than $15 million. Effective Jan 13, 2021, the company divested its U.K. fruit business, including the Orchard House Foods Limited business and associated brands to a U.K.-based private equity company– Elaghmore. Management cited that by divesting this business, the go-forward company-wide gross margins will expand by nearly 150 basis points (bps) and EBITDA margins will increase by about 100 bps.
Incidentally, the Zacks Rank #2 (Buy) stock has appreciated 87.8% over the course of a year and outperformed the industry’s 57.1% rise. Also, a Growth Score of A further speaks volumes for the company.
Buoyed by a robust second-quarter fiscal 2021 performance, management reaffirmed view for the fiscal year. In fact, in the reported quarter, earnings surpassed the Zacks Consensus Estimate for the sixth straight quarter. While higher sales and margins fueled the bottom line, increased sales in the North America and International segments aided the top line. Margins were also impressive in the fiscal second quarter
Hence, management continues to anticipate gross margin and adjusted EBITDA margin expansion, along with double-digit adjusted EBITDA and operating free cash flow improvement for the same fiscal. With respect to the second half, management assumes foreign-exchange translation to be a tailwind compared with the year-ago period. Management projects inventory levels to decline throughout second-half fiscal 2021. For the fiscal third quarter, it forecasts solid gross margin and EBITDA margin expansion, with adjusted EBITDA growing close to 10%.
All in all, Hain Celestial looks well poised for growth, given the aforementioned factors including sound fundamentals and transformation strategy.
More Solid Food Stocks
United Natural Foods UNFI has delivered a trailing four-quarter average earnings surprise of 13.6% and presently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nomad Foods NOMD has delivered an earnings surprise of 8.9% in the past four quarters, on average. It carries a Zacks Rank #2.
Lamb Weston LW, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 9.9%.
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The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
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