The Hain Celestial Group, Inc. - Momentum
September 04 2012 - 8:00PM
Zacks
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) 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%.
![](http://www.zacks.com/images/upload_dir/1346779423.jpg)
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