With seven straight quarters of positive earnings surprises and a stock price hovering close to its 52-week high, The Hain Celestial Group, Inc. (HAIN - Analyst Report) offers a strong momentum opportunity even in a volatile market. Shares of this natural food and personal care product provider have shot up nearly 90% year-to-date, mirroring its strong fundamentals.
Since posting solid fourth-quarter 2012 results that included year-over-year earnings per share growth of 31% and a positive surprise of 4%, the share price of this Zacks #1 Rank (Strong Buy) stock has jumped roughly 21%. Also, its earnings momentum has been trending higher off the strong quarter. Over the last 30 days, 11 of 12 estimates for fiscal 2013 were revised higher.
Fabulous Quarter, Upbeat Guidance
Hain Celestial posted better-than-expected fourth quarter results on August 22, thanks to a rise in consumption, innovative marketing and expanded distribution. Earnings per share came in at 47 cents, which surpassed the Zacks Consensus Estimate by a couple of cents, and jumped from last year's 36 cents. Looking at the earnings surprise trend over the last seven quarters, Hain Celestial has topped estimates by an average of 6%.
Total revenue increased 22% year over year to $350.8 million. However, including sales of the United Kingdom private-label chilled ready meals operations (discontinued business), revenue came in at $373.8 million, up 28%. Operating profit grew 27% to $36.2 million, whereas its operating margin expanded 36 basis points to 10.3%.
The company expects to sustain strong momentum as it remains well positioned to capitalize on the growing global demand for organic products through acquisitions, which has been a key strategy in building market share. Management now expects sales to be in the range of $1.600 billion to $1.615 billion and earnings between $2.10 and $2.20 per share for fiscal 2013.
Soaring Earnings Momentum
The Zacks Consensus Estimate for fiscal 2013 has risen by 11% to $2.32 per share in the past 30 days, as 11 of 12 estimates have been revised higher. The current estimate implies year-over-year growth of 6%. The current estimate is far above the high end of management's guidance.
For fiscal 2014, 4 of 10 estimates were revised higher over the same timeframe, lifting the Zacks Consensus Estimate by 13% to $2.69 per share. The current estimate suggests year-over-year growth of 16%.
Valuation Reflects Fundamental Strength
Hain Celestial currently trades at a forward P/E of 29.8x, reflecting a 60% premium to the peer group average of 18.6x. Again its price-to-book ratio of 3.2 is at a substantial premium to the peer group average of 1.9. Given the company's compelling fundamentals, the premium valuation is justified and well supported by its long-term estimated EPS growth rate of 15% versus 13% for the peer group.
With respect to return on assets (ROA), the stock looks attractive. It has a 12-month ROA of 5.2%, which is above its peer group average of 4.8%. This implies that the company is utilizing its assets more efficiently than its peers.
Chart Echoing Strength
Barring a few occasional pull backs, shares of Hain Celestial have been steadily rising since the beginning of this year. A day after reporting stronger-than-anticipated fourth quarter results the stock leapt approximately 19% to close at $67.77 on August 23. Since then, the stock has been trading close to its 52-week high of $70.74, which was reached on August 24.
The stock has been consistently trading above its 200-day moving average since October 18 of last year. It has also remained above the 50-day moving average since August 17 of this year.
Volume is fairly strong, averaging roughly 651K shares daily. The year-to-date return for the stock is 90% compared with the S&P 500's return of 10%.
Incorporated in 1993 and headquartered in Melville, New York, Hain Celestial produces, distributes, markets, and sells various natural and organic foods as well as personal care products in the United States, Canada and Europe.
The company offers popular better-for-you groceries (non-dairy beverages and frozen desserts, flour and baking mixes, cereals, condiments, cooking oils, infant and toddler food, etc.), snacks (potato and vegetable chips, organic tortilla style chips, whole grain chips and popcorn, etc.), and tea (including herb teas such as Lemon Zinger, Peppermint, Mandarin Orange Spice, Cinnamon Apple Spice, Red Zinger, etc.).
The company provides natural personal care products under brands such as Avalon Organics, Alba Botanica, JASON, Zia, Queen Helene and TenderCare brands. Hain Celestial, which competes with General Mills, Inc. (GIS) and Kraft Foods Inc. (KFT), currently has a market cap of $3.1 billion.