A month has gone by since the last earnings report for Hain Celestial (HAIN Quick QuoteHAIN - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hain Celestial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hain Celestial Q2 Earnings Beat Estimates, Decline Y/Y

Hain Celestial posted mixed results in second-quarter fiscal 2024 results, wherein the bottom line beat the Zacks Consensus Estimate while the top line missed the same.

Quarter in Detail

Hain Celestial posted adjusted earnings of 12 cents per share, outpacing the Zacks Consensus Estimate of 11 cents. The bottom line declined from adjusted earnings of 20 cents per share reported in the year-ago fiscal quarter.

Net sales of $454.1 million missed the consensus estimate of $460 million. The top line was flat year over year. After adjusting for acquisitions, divestitures and discontinued brands, organic sales rose 0.2% from the year-ago fiscal quarter’s reported figure.

Adjusted gross profit of $106.8 million rose 2.8% from the year-ago quarter’s figure while the adjusted gross margin increased 60 basis points (bps) from the year-ago fiscal quarter’s reported figure to 23.5%. We had expected the adjusted gross margin to expand 110 bps to 19.1%.

SG&A expenses increased 2.2% to $74 million. The metric, as a percentage of net sales, increased 40 bps year over year to 16.3%. We had expected SG&A expenses, as a percentage of net sales, to increase 300 bps to 18.9%.

Adjusted EBITDA dropped 5.4% from the year-ago fiscal quarter’s reported figure to $47.1 million, while adjusted EBITDA margin decreased 60 bps to 10.4%. We had expected an adjusted EBITDA margin contraction of 210 bps to 8.9%.

Segmental Results

Net sales in the North America segment tumbled 5.2% from the year-ago fiscal quarter’s reported figure to $267.7 million. After adjusting currency movements, divestitures and discontinued brands, adjusted net sales fell 4.8%. The decline was due to lower sales of baby formula stemming from persistent industry-wide challenges in organic formula supply, along with an optimized channel mix for better trade efficiency. This was partly offset by growth in Beverages. We expected North America’s sales to fall 2% to $276.7 million in the reported quarter.

The segment’s adjusted EBITDA amounted to $31.2 million, down 18.9% on a year-over-year basis. Adjusted EBITDA margin in the quarter decreased 190 bps to 11.7%.  

The International segment’s net sales grew 8.5% from the year-ago fiscal quarter’s reported figure to $186.4 million. The sales growth was primarily driven by a 5.8 percentage points increase from favorable currency impacts and growth in Meal Prep and Beverages. We had anticipated the segment’s sales to rise 9.6% to $188.3 million in the reported quarter.

Its adjusted EBITDA was $26 million, up 35% from the year-ago fiscal quarter’s reported figure. Adjusted EBITDA margin in the quarter expanded 270 bps to 13.9%.

Other Financials

Hain Celestial ended the reported quarter with cash and cash equivalents of $53.7 million, long-term debt (excluding the current portion) of $801.7 million and total shareholders’ equity of $995.8 million.

The company reported cash provided by operating activities of $34.7 million and an operating free cash flow of $22 million during the year-to-date period of fiscal 2024.

Guidance

The company has been seeing early progress against Hain Reimagined. The company has accelerated its few initiatives outlined in the Focus Pillar, including the portfolio and channel mix improvements. This is likely to result in a near-term revenue headwind. Additionally, it forecasts less tailwind from foreign exchange than it had initially expected in August. HAIN updated its outlook for fiscal 2024. For the fiscal year, management projects organic sales growth of about 1% or more compared with the earlier guidance of a 2-4% rise.

It now expects adjusted EBITDA between $155 million and $160 million versus the earlier expectation of $155-$165 million. The company now anticipates a free cash flow of $40-$45 million compared with $50-$55 million guided earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -44.21% due to these changes.

VGM Scores

Currently, Hain Celestial has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hain Celestial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Hain Celestial is part of the Zacks Food - Miscellaneous industry. Over the past month, McCormick (MKC Quick QuoteMKC - Free Report) , a stock from the same industry, has gained 3.9%. The company reported its results for the quarter ended November 2023 more than a month ago.

McCormick reported revenues of $1.75 billion in the last reported quarter, representing a year-over-year change of +3.4%. EPS of $0.85 for the same period compares with $0.73 a year ago.

For the current quarter, McCormick is expected to post earnings of $0.59 per share, indicating no change from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

McCormick has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.