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Schiff Nutrition Int'l

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Schiff Nutrition International Inc. (SHF) delivered a 27.8% earnings surprise in its fiscal first quarter, and also raised its guidance for the year. Shares of this nutrition supplement company reached a 52-week high immediately following the earnings announcement. Earnings momentum has been trending higher, which made SHF a Zacks #1 Rank (Strong Buy) stock on September 29, 2012.

Solid First Quarter

On September 18, Schiff Nutrition reported adjusted earnings per share of 23 cents for its fiscal first quarter, beating the Zacks Consensus Estimate by 27.8%. Net income increased 28.2% year over year to $6.0 million. The company has now reported positive earnings surprises in 3 out of the past 4 quarters.

Net sales climbed 46.2% to $85.1 million, surpassing the Zacks Consensus Estimate by 10.8%. Sales of branded offerings rose 49.3% to $74.8 million, reflecting a positive impact from the March 2012 takeover of Airborne (a prominent brand in the immunological support segment of the dietary supplements business).

Gross margin rose to 47.1% from 44.7% in the year-ago quarter despite being adversely impacted by 180 basis points due to purchase adjustment for inventory carried over from Airborne. Adjusted EBITDA was $17.4 million, up 81.3% from a year ago.

Guidance Raised

The company raised its revenue growth guidance for fiscal 2013 to between 43% and 46% from the earlier projection of 40% to 43%. The range for gross margin was lifted to between 49% and 51% from the earlier outlook of 48% to 50%. The forecast for operating margin has been hiked to between 14.5% and 16%, instead of 12.5% to 14%.

Earnings Momentum on the Rise

The Zacks Consensus Estimate for fiscal 2013 is up 10.3% in the last two months to 86 cents per share, reflecting an estimated year-over-year growth of 44.0%. For 2014, the Zacks Consensus Estimate has moved up 19.1% to $1.12, reflecting implied growth of 29.4%.

Stretched Valuation

Schiff Nutrition trades at a premium to its peers by most metrics. The stock is currently trading at a forward P/E multiple of 26.9, a 180.6% premium to the peer group average of 9.6. The price-to-book ratio of 5.7 is a good 51.7% higher than the peer group average of 3.7. The stock fares better under the price-to-sales metric, where its score of 2.38 is at a discount of 11.5% to the peer group average of 2.69.

A Look at the Chart

After drifting for several months, the stock has rallied lately. It is currently trading above both its 50-day and 200-day moving averages. Schiff Nutrition has rallied as much as 119.7% since the start of the calendar year, compared with a 14% return from the benchmark S&P 500.

Based in Salt Lake City, Utah, Schiff Nutrition is a sports nourishment and nutrition supplement company with offerings that include nutritional bars and vitamins. The company concentrates in four key areas, namely digestion health, immunological support, care of joints and health of the heart. Its wide range of brands includes Tiger’s Milk and Schiff Vitamins. It has a market cap of about $680 million.

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