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Hain Celestial (HAIN) Up 1.6% Since Earnings Report: Can It Continue?

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More than month has gone by since the last earnings report for The Hain Celestial Group, Inc. (HAIN - Free Report) . Shares have added about 1.6% in that time frame.

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

Hain Celestial Q4 Earnings & Sales Beat Estimates

The Hain Celestial Group reported better-than-expected financial numbers in fourth-quarter fiscal 2017 after missing the Zacks Consensus Estimate in the previous quarter.

The company reported adjusted earnings per share of 43 cents, flat year over year but ahead of the Zacks Consensus Estimate of 40 cents. However, the company’s earnings per share were breakeven on a GAAP basis, compared with loss per share of 86 cents reported in the year-ago quarter. The foreign currency headwinds negatively impacted the earnings by 3 cents per share.

Net sales declined 2% year over year to $725.1 million but came ahead of the Zacks Consensus Estimate of $714 million. However, the company’s sales increased 2% on a constant currency basis. Foreign currency headwinds impacted net sales by $28.2 million.

In the fiscal 2017, the company generated net sales of $2,853.1 million, down 1.1% year over year primarily due to dismal performance of the U.S. and U.K. segment. Moreover, adverse foreign currency fluctuations impacted net sales by $124.3 million. On a constant currency basis, sales grew 3% year over year.

Segment Performance

In the reported quarter, net sales at U.S. segment inched up 1% year over year to $309 million. Net sales in U.K. declined 10% to $194.8 million. Further, operations in the Rest of World segment witnessed a 2% increase in net sales to $40.2 million, while Hain Pure Protein Corporation (HPPC), acquired in July 2014, observed a gain of 8% in net sales to roughly $122.2 million.

The company continues to focus on 500 SKUs as well as top 11 brands to drive growth. These brands include Terra, Celestial Seasonings, Dream, Earth’s Best, MaraNatha, Imagine, Garden of Eatin', The Greek Gods, Sensible Portions and Spectrum, along with Alba Botanica.

Gross profits were down 0.2% year over year to $149.7 million. Adjusted operating income fell 6.2% to $67.2 million, while adjusted operating margin contracted 40 basis points to 9.3%.

Other Financials

The company ended the quarter with cash and cash equivalents of $147 million, long-term debt (excluding current maturities) of nearly $740.3 million, and shareholders’ equity of $1,712.8 million. Cash flow from operating activities for fiscal 2017 was $216.6 million, up 4.9% year over year, while capital expenditures were roughly $63.1 million. The company generated operating free cash flow of $153.5 million during fiscal 2017, up 18.7% year over year.

Strategic Initiatives

During the quarter, the company completed two strategic acquisitions. Hain Celestial revealed that one of its wholly-owned subsidiaries acquired England based, The Yorkshire Provender Limited. Founded in 2007, Yorkshire Provender prepares superior soup brands, with its products being sold to major retailers, on-the-go food joints and other food service providers in U.K. Hain Celestial is likely to benefit from this deal, as it will enhance its soup offerings, alongside leading to infrastructural growth.

Moreover, Hain Celestial Group also acquired Portland, OR, based firm, The Better Bean Company. This buyout which will aid its expansion is the first acquisition by the Hain Celestial Cultivate Ventures.

The company, which began a strategic review under Project Terra in fiscal 2016, anticipates to generate worldwide cost savings worth $350 million through fiscal 2020 (comprises annual productivity). To achieve the savings, the company intends to optimize plants, co-packers and procurement, along with rationalizing product portfolio. Further, it plans on reinvesting the additional savings through brand development and household penetration.

Earlier the company had announced that in an attempt to augment sales and margin growth, the company plans to create five strategic platforms in U.S. segment, including Fresh Living, Better-for-You Baby, Better-for-You Snacking, Better-for-You Pantry and Pure Personal Care.

Guidance

Following better-than-expected fourth-quarter results, the company is optimistic about sustaining the momentum into fiscal 2018. For fiscal 2018, the company expects net sales between $2.967 billion and $3.036 billion, representing growth of 4-6% on a year-over-year basis. Growth in the United States and HPP are projected to be in the range of low to mid-single digit. Meanwhile, U.K. and the Rest of World segment are projected to witness growth of mid to high-single digits. Profits in fiscal 2018 are expected to be robust with adjusted EBITDA to be between $350 million and $375 million, up nearly 27% to 36% year over year. Cash flow from operation is anticipated in the range of $235-$270 million, while capital expenditure is projected to be $75 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Hain Celestial's stock has a great Growth Score of A, though it is lagging a bit on the momentum front with a C. Charting a similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and value.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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