A leader in the natural food and personal care product categories, with an extensive portfolio of well-known brands and strong fundamentals, The Hain Celestial Group, Inc. HAIN is poised for a surge as the economy gradually revives and the demand for organic food increases. Hain Celestial’s strategic investments, coupled with its continued efforts to contain costs, boost productivity and enhance margins, enable it to deliver encouraging results. Further, its long-term earnings per share growth rate stands at a healthy 12.4%.
A Look at HAIN’s Past Performance
During the first quarter of fiscal 2016, the company witnessed top- and bottom-line growth of 8.9% and 8.8%, respectively. Rise in consumption, innovative marketing and expanded distribution, as well as acquisitions are aiding the company's performance. This was the third straight quarter of in-line earnings.
Although net sales advanced, the same fell short of the Zacks Consensus Estimate, after two successive quarters of revenue beat. Moreover, we observe that the rate of sales growth decelerated sharply from 20%, 18.9%, 30.2% and 32.2% recorded in the fourth, third, second and first quarters of fiscal 2015, respectively. We believe that competition will be stiff, with a gradual increase in the number of companies expanding their presence in the natural and organic food business.
Why Should You Hold on to the Stock?
Hain Celestial, through strategic opportunities, constantly endeavors to expand its footprint in the organic and natural products category in order to offer “A Healthier Way of Life.” Acquisitions have played a vital role in Hain Celestial’s strategy of building market share. In its latest step toward this direction, the company acquired Orchard House Foods Limited ("Orchard House"), one of the leading providers of prepared fruit, juices, fruit desserts and other ingredients, with facilities in Gateshead and Corby in the U.K.
The company had earlier acquired Tilda Limited, a renowned name in Basmati rice, and Rudi's Organic Bakery, one of the leading organic and gluten-free companies. It also purchased leading packaged grocery brands – Hartley's, Gale's Robertson's, Frank Cooper's and Sun-Pat – from Premier Foods plc. Additionally, it acquired Ella's Kitchen Group Limited that offers organic baby food products. Hain Celestial’s other acquisitions include those of leading plant-based food and beverage company, Mona Group, and Belvedere International, Inc. – provider of health and beauty care products, including the Live Clean brand with about 200 baby, body and hair care products.
Going forward, we believe that the company will remain focused on higher productivity and efficient pricing. Moreover, Hain Celestial has undertaken a number of initiatives to improve its performance and thus, positioned itself on the growth trajectory. The company’s Stock Keeping Unit (“SKU”) rationalization program has helped in eliminating SKUs which had lower sales volumes or weak margins.
Zacks Rank
Hain Celestial currently carries a Zacks Rank #3 (Hold). Investors may consider better-ranked stocks such as Campbell Soup Company CPB, Boulder Brands, Inc. BDBD and Omega Protein Corporation OME, all sporting a Zacks Rank #1 (Strong Buy).
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