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Key Factors to Influence Hain Celestial (HAIN) Q4 Earnings

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Key Factors to Influence Hain Celestial (HAIN) Q4 Earnings

Hain Celestial (HAIN) is reeling from high operating margins and SG&A expenses that are likely to affect Q4 results.

The Hain Celestial Group, Inc. HAIN is scheduled to report fourth-quarter fiscal 2018 results on Aug 28, before the market opens. In the last quarter, the company delivered a negative earnings surprise of 21.3%. Investors are keeping their fingers crossed and hoping that the company surpasses estimates this time.

Which Way Are Top & Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for the quarter under review stands at 26 cents, reflecting a year-over-year decline of 39.5%. We note that the Zacks Consensus Estimate has remained stable in the last 30 days.

The Zacks Consensus Estimate for revenues is $628.6 million, down roughly 13.1% from the year-ago quarter. We note that total revenues of this New York-based company decreased 4.3% in the last reported quarter.

Let’s see how things are shaping up prior to this announcement.

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 at Play

Hain Celestial is witnessing low-single-digit sales in the United States for a while now. Also, the company’s top and bottom lines missed estimates for the second quarter in a row in the third quarter along with a trimmed fiscal 2018 earnings view.

The company also struggled with its operating margin that shrunk 110 basis points to 8.9%. We note that SG&A expenses for the quarter rose 13%, whereas a percent of sales for the same increased 50 basis points to 13.4%. In the second and first quarter, SG&A expenses increased 6.1% and 6.8%, respectively. Persistence of this trend may hurt the company’s bottom line in near future.

Further, management had earlier lowered the earnings per share range to $1.11-$1.18 from the earlier $1.39-$1.50 projected earlier (including 8-9 cents of gain from the latest tax reform) owing to continued higher investment in marketing and brand awareness, primarily in the United States, along with increased freight and certain commodity price headwinds.

Nonetheless, in order to improve efficiency and simplify brand portfolio, the company decided to divest Hain Pure Protein business, which is likely to close in the first half of fiscal 2019. With an extensive portfolio of brands, Hain Celestial offers one of the strongest growth profiles. Acquisitions have been a key part of the company’s strategy to gain market share.

Moreover, Hain Celestial, which began a strategic review under Project Terra in fiscal 2016, expects to generate worldwide cost savings worth $350 million through fiscal 2020 (comprises annual productivity). To achieve these savings, the company intends to optimize plants, co-packers and procurement along with rationalizing product portfolio. Consequently, it plans to reinvest the additional savings in brand development and household penetration. Out of $100 million targeted for the fiscal, the company attained cost savings of $35 million in the first half of fiscal 2018 and $25 million (including Hain Pure Protein) in the third quarter under its Project Terra.

What the Zacks Model Unveils

Our proven model does not conclusively show that Hain Celestial is likely to beat estimates this quarter as the stock does not have the right combination of 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 +7.69% and a Zacks Rank #4 (Sell), which makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

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

Dollar Tree DLTR has an Earnings ESP of +2.41% and a Zacks Rank #2.

Best Buy Co. BBY has an Earnings ESP of +1.46% and a Zacks Rank #2.

McCormick & Company MKC has an Earnings ESP of +0.99% and a Zacks Rank #3.

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