Hain Celestial: A Strong Buy - Analyst Blog
September 27 2012 - 1:34PM
Zacks
A solid year-to-date return of 72.8%, strong fourth-quarter 2012
results and rising estimates aided The Hain Celestial
Group, Inc. (HAIN) to attain a Zacks #1 Rank (Strong Buy)
on August 25, 2012. This natural food and personal care products
provider has outperformed the Zacks Consensus Estimates in 7
straight quarters, averaging about 5.6%.
The Rank Drivers
Hain Celestial offers investors one of the strongest growth
profiles in the industry. The company’s strategic investments plus
continued efforts to contain costs, increase productivity, and
enhance cash flows and margins, have enabled it to deliver healthy
results. This is quite evident from Hain’s fourth-quarter 2012
results.
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.
Hain Celestial posted better-than-expected fourth quarter
results on August 22, thanks to a rise in consumption, innovative
marketing and expanded distribution. The quarterly earnings of 47
cents per share surpassed the Zacks Consensus Estimate of 45 cents
by 4.4%, and year-ago earnings of 36 cents by 30.6%.
Total revenue increased 22.3% 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 26.6% to
$36.2 million, whereas operating margin expanded 36 basis points to
10.3%.
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.
Decent Earnings Estimate Revisions
The Zacks Consensus Estimate for fiscal 2013 rose 12.9% to $2.37
in the last 60 days, while for fiscal 2014 it advanced 17.6% to
$2.81. The fiscal 2013 estimate is far above the upper end of the
guidance range, and implies year-over-year growth of 8.5%. The
fiscal 2014 estimate suggests a yearly increase of 18.6%.
Valuation Reflects Fundamental Strength
Hain Celestial currently trades at a forward P/E of 26.55x,
reflecting a 40.1% premium to the peer group average of 18.95x.
Also, its price-to-book ratio of 2.91 is at a substantial premium
to the peer group average of 2.09.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 12.7% 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.
Overview
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 . It also 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 $2.82 billion.
GENL MILLS (GIS): Free Stock Analysis Report
HAIN CELESTIAL (HAIN): Free Stock Analysis Report
KRAFT FOODS INC (KFT): Free Stock Analysis Report
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