The Hain Celestial Group, Inc. (HAIN) started fiscal 2015 on a strong note as the company’s first quarter yielded historically high revenues and adjusted earnings. Adjusted earnings per share of 68 cents from continuing operations grew 31% year over year while beating the Zacks Consensus Estimate by a couple of cents.
However, on a reported basis, the company’s earnings came in at 37 cents per share from continuing operations, down 35% from the prior-year quarter.
Management stated that double-digit growth across domestic and United Kingdom operations helped the company to post record sales for the 16th straight quarter. Net sales increased 32.2% to $631.3 million but missed the Zacks Consensus Estimate of $638 million. However, sales grew 34.6% to $642.6 million, adjusting for the recall of nut butter.
Net sales in the United States increased 8% year over year to nearly $336.9 million in the quarter while net sales in the United Kingdom increased 51.1% to $172.3 million. Operations in the Rest of World segment witnessed a marginal decline of 0.2% in net sales to $51.4 million. Hain Pure Protein Corporation (HPPC), which was acquired in July this year, reported net sales of $70.7 million.
The company registered strong performance across all of its brands, with 23 brands reporting double-digit year-over-year growth and 6 brands recording mid-to-high single-digit growth in the quarter. Hain Celestial’s top line recorded robust contribution from brands like Spectrum, Sensible Portions, Earth's Best, Ella's Kitchen, Sun-Pat, Garden of Eatin', Johnson's Juice Co., Avalon Organics, New Covent Garden Soup Co., Linda McCartney, Danival, Imagine, Europe's Best, Sunripe, Westbrae, Queen Helene, Walnut Acres, Gale's, and Frank Cooper's.
Adjusted gross profit rose 26.2% year over year to $151.3 million in the quarter. However, as a percentage of sales, it contracted 160 basis points (bps) to 23.5%. Adjusted operating income rose 36.7% to $58.8 million in the quarter. Moreover, adjusted operating margin expanded approximately 20 bps to 9.2%.
Other Financial Details
The company ended the quarter with cash and cash equivalents of $92.7 million, long-term debt excluding current maturities of $787.6 million and shareholder equity of $1,606.9 million, reflecting a debt-to-capitalization ratio 26.8%. Cash flow from operating activities in the quarter came in at $2.6 million.
Outlook
We believe that the company will sustain the strong momentum across all business segments and will be favorably poised to capitalize on the growing global demand for organic products.
Guidance
Hain Celestial reiterated its guidance for fiscal 2015. The company still anticipates sales to come in the range of $2,725–$2,800 million, up 27%—30% from fiscal 2014. Earnings per share are expected to come between $3.72 and $3.90 representing year-over-year increase of 17% to 23%. The Zacks Consensus Estimate for the fiscal year stands at $3.83 per share.
Zacks Rank
Currently Hain Celestial carries a Zacks Rank #2 (Buy). Some other better-ranked stocks worth consideration in the food industry include ConAgra Foods Inc. (CAG), McCormick & Company Inc. (MKC) and Post Holdings Inc. (POST), all carrying Zacks Rank #2.
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