The Hain Celestial Group Inc. (HAIN), which distributes, markets and sells various natural and organic foods as well as personal care products, recently posted better-than-expected third-quarter 2011 financial results.
The quarterly earnings of 36 cents a share beat the Zacks Consensus Estimate of 34 cents, and climbed 38.5% from 26 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 38 cents compared with 6 cents a share earned in the year-ago quarter.
Quarterly Performance
Revenue in the quarter increased by 29.8% to $288.4 million from $222.1 million delivered in the prior-year quarter, and also came well ahead of the Zacks Consensus Estimate of $263 million. Hain Celestial was able to post healthy sales aided by United States, Canadian and European operations as well as recent acquisitions.
The company registered robust contribution from Grocery and Snacks, Celestial Seasonings and Personal Care units with double-digit sales growth witnessed across brands such as Earth's Best infant and toddler products, MaraNatha nut butters, Spectrum oils, Dream non-dairy frozen desserts, Terra chips, Lima organic foods and Avalon and Alba personal care brands. Hain Celestial also experienced solid sales across recently acquired brands, Sensible Portions snacks and The Greek Gods yogurt.
Acquisitions have been a key part of Hain Celestial’s strategy to build market share. Not only have they widened the company’s geographical presence, they have also provided opportunities to cross-sell products in the U.S., Canadian, and European markets.
We believe that with an extensive portfolio of well-known brands, Hain Celestial offers investors one of the strongest growth profiles in the industry. The stock is poised to rise as the economy gradually revives and demand for healthier and natural food improves.
Despite a 28.2% rise in cost of sales, gross profit soared 34.2% to $82.6 million in the quarter, whereas gross profit margin expanded 90 basis points to 28.6%, reflecting favorable product mix, partially offset by higher input costs. On an adjusted basis, gross profit margin increased 100 basis points to 28.7%.
Financial Aspects
Hain Celestial generated operating free cash flow of $61 million for the 12-month period ended March 31, 2011. The company ended the quarter with cash and cash equivalents of $25.6 million and total long-term debt of $237.3 million, with debt being 28.3% of shareholders’ equity of $839.2 million.
Guidance
Hain Celestial now expects total revenue between $1,095 million and $1,115 million, and earnings in the range of $1.30 to $1.34 per share for fiscal 2011. Earlier, the company had forecasted revenue between $1,060 million and $1,080 million, and earnings between $1.24 and $1.31 per share.
The current Zacks Consensus Estimate for fiscal 2011 is $1.31 that lies at the low-end of the guidance range.
Currently, we have a long-term Neutral rating on the stock. Hain Celestial, which competes with General Mills Inc. (GIS) and Kraft Foods Inc. (KFT), holds the Zacks #2 Rank, which translates into a short-term Buy rating.
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