Hain Celestial Group, Inc. HAIN is slated to release second-quarter fiscal 2019 results on Feb 7, before the opening bell. In the last quarter, the company delivered a negative earnings surprise of 30.8%. In three of the trailing four quarters, this food conglomerate has underperformed the Zacks Consensus Estimate, recording average negative earnings surprise of 12.7%.
How are Estimates Faring?
The Zacks Consensus Estimate for earnings in the fiscal second quarter stands at 26 cents, reflecting year-over-year decline of 36.6%. We also note that the Zacks Consensus Estimate has gone down by 2 cents in the past 60 days.
The company posted first-quarter adjusted earnings of 9 cents a share that declined sharply from 20 cents recorded in the year-ago period. Lower net sales, higher interest and other expenses negatively impacted the bottom line in the previous quarter.
The Zacks Consensus Estimate for revenues is $612 million, down approximately 21.1% from $775.2 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 and EPS Surprise
Factors Influencing Performance
Hain Celestial is concerned about dismal sales surprise history, stemming from softness in its U.S. segment along with weakness in U.K. and Rest of World sales. Also, higher trade and promotional investments in the United States along with escalated freight and commodity costs have been hurdles to profitability.
Adding to the woes, rising SG&A expenses have been weighing on the company’s profitability. In fact, SG&A costs increased 10 basis points (bps) to 14.7% as a percentage of sales in the first quarter. As a result, adjusted EBITDA plunged 36%, while adjusted EBITDA margin shrunk 300 bps to 6.1%.
All said, we expect the company to get some respite from Project Terra, which generated cost savings of $60 million during the first quarter of fiscal 2019. Going ahead, the company expects savings of roughly $90-$115 million in fiscal 2019. Additionally, the company is divesting its Hain Pure Protein business to boost efficiency and simplify brand portfolio. Apart from these, the company is focusing on global expansion, with plans to expand distribution network in China and capture the India market. Additionally, Hain Celestial is focusing on making marketing investments in key brands to boost growth.
What Does the Zacks Model Say?
Our proven model does not conclusively show that Hain Celestial is likely to beat estimates this quarter. 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.
Hain Celestial has a Zacks Rank #4 (Sell) and an Earnings ESP of -7.69%. 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.
Stocks With Favourable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Nomad Foods NOMD has an Earnings ESP of +1.45% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Monster Beverage Corporation MNST has an Earnings ESP of +0.31% and a Zacks Rank of 2.
Post Holdings POST has an Earnings ESP of +0.56% and a Zacks Rank of 3.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment