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Hain Celestial (HAIN) Q2 Earnings Miss by a Penny, Stock Down

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The Hain Celestial Group, Inc. (HAIN - Free Report) concluded second-quarter fiscal 2018 on a dismal note. Both earnings and sales lagged estimates but improved year over year.

The company reported adjusted earnings per share of 41 cents missing the Zacks Consensus Estimate of 42 cents. However, the bottom-line results improved 28.1% year over year. Moreover, on a GAAP basis earnings increased to 45 cents from 26 cents reported in the prior-year quarter.

Net sales increased 5% year over year to $775.2 million, coming almost in line with  Zacks Consensus Estimate of $776 million. Rise in sales can primarily be attributed to mid-single digit growth in United Kingdom, Canada and Europe and Hain Pure Protein segments. This was partially negated by low-single digit decline in the United States. The company’s sales increased 2% on a constant currency basis.

Following the dismal results, the stock declined 2.9% on Feb 7. Moreover, the company’s shares have tanked 13.8% in the past month, wider than the industry’s decline of 3.8%.



Segment Performance

In the reported quarter, net sales at the United States segment dipped 3% year over year to $270.3 million. Net sales in UK and Rest of the World segments rose 12% each to $238.2 million and $107.7 million, respectively. Sales for the Hain Pure Protein segment reflected a gain of 4% in net sales to roughly $159 million.

Recently, the company announced plans to divest its Hain Pure Protein business. Further, 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, Spectrum and Alba Botanica.

Gross profits were up 4.3% year over year to $144.3 million. Adjusted operating income surged 21% to $62.1 million, while adjusted operating margin expanded 110 basis points to 8%.

Other Financials

The company ended the quarter with cash and cash equivalents of $139.2 million, long-term debt (excluding current maturities) of nearly $742.1 million, and shareholders’ equity of $1,822.5 million. Cash flow from operating activities was $44.9 million in the quarter, compared with $103.3 million as in the prior-year quarter. Capital expenditures were roughly $16.1 million. The company generated operating free cash flow of $28.8 in second-quarter fiscal 2018, compared with $89.1 million in the prior-year quarter.

Outlook

Hain Celestial remains committed to its four-point strategic plan aid in June 2017, including investment in top brands and capabilities to grow globally; delivering on Terra cost savings and productivity; enhancing leadership to deliver on strategic goals; and returning value to shareholders.

Following second-quarter results, the company adjusted guidance ranges for EBITDA and earnings per share for fiscal 2018 while reiterating net sales projections. For fiscal 2018, the company continues to expect 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, UK and the Rest of World segment are projected to witness growth of low to mid-single-digit, compared with prior estimate of mid to high-single digits.

Adjusted EBITDA is now projected in the range of $340-$355 million, representing growth of nearly 24-29% year over year. This reflects a slight decline from the prior guidance range of $350-$375 million, reflecting an improvement of 27-36%.

Cash flow from operation is anticipated in the range of $200-$235 million, while capital expenditure is projected to be $75 million.

The company now projects adjusted earnings per share to be in the range of $1.64-$1.75, including an 8-9 cents gain from the new tax reform and reflecting a 34-43% upside from the prior-year quarter. Earlier, the company had anticipated earnings per share in the range of $1.63-$1.80, up nearly 34-48%.

Zacks Rank & Stocks to Consider

Hain Celestial currently carries a Zacks Rank #4 (Sell). Better-ranked stocks which warrant a look in the same industry include Sysco Corporation (SYY - Free Report) sporting a Zacks Rank #1 (Strong Buy), United Natural Foods, Inc. (UNFI - Free Report) and Lamb Weston Holdings, Inc. (LW - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sysco has delivered positive earnings surprise of 1.1% in the trailing four quarters. Moreover, the stock has surged 8.1% in the last three months.

United Natural Foods has an impressive long-term earnings growth rate of 6.2%. The stock has increased 7.9% in three months.

Lamb Weston Holdings earnings have surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 7.9%. The stock has surged 10.3% in the last three months.

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