Hain Celestial's Earnings In-Line - Analyst Blog

The Hain Celestial Group, Inc. (HAIN) recently reported second-quarter 2010 results buoyed by strong profit generation at its North American and Continental European operations.

The quarterly earnings of 31 cents a share were in line with the Zacks Consensus Estimate, and soared 72.2%% from 18 cents delivered in the prior-year quarter. The year-ago quarter excludes the net income of 2 cents a share from Hain Pure Protein (HPP). Hain Pure Protein Corporation processes, markets and distributes antibiotic-free chicken and turkey products.

Effective Jun 30, 2009, Hain has not been incorporating HPP’s results due to the reduction in the company’s ownership interest to 48.7% from 50.1%. However, on a reported basis, including one-time items, quarterly earnings were 27 cents a share, up 35% from 20 cents posted in the year-ago quarter.

Quarterly Performance

Revenue for the quarter tumbled 22.5% to $242 million from $312.2 million delivered in the prior-year quarter. The quarterly revenue was hurt by inventory de-stocking by two major distributors, but was favorably impacted by foreign currency movements.

Prior-year quarter revenue includes $61.5 million of sales related to HPP. Excluding HPP sales, revenue for the quarter fell 3.5% year-over-year. Management hinted at improving consumption trends and a stable cost environment.

Cost of sales dropped 7% to $172.1 million. Consequently, gross margin for the quarter expanded 270 basis points to 28.9%, after adjusting the year-ago quarter’s gross profit results for HPP.

Hain Celestial generated free cash flow of $37.7 million in the trailing 12-month period. Hain’s balance sheet remains healthy, with debt being 32.1% of shareholders’ equity of $732.2 million. During the quarter, the company lowered its debt by $7 million.

Hain Celestial produces, distributes, markets and sells various natural and organic foods as well as personal care products in the United States (U.S.), Canada and Europe.

Guidance

Hain Celestial expects fiscal year 2010 earnings in the range of $1.05 to $1.10 per share, and revenue between $920 million and $940 million.

Zacks Estimate Trend for 3rd-Quarter 2010

The current Zacks Consensus Estimate of 37 cents a share has climbed 2.8% in the last 30 days, with only one out of 12 analysts covering the stock having increased his or her estimate substantially. The company’s history of earnings surprises, when compared to the Zacks Consensus Estimate for the last four quarters (including the reported) varies between negative 9.7% and 0%, with the average being negative 9.2%.

Hain Celestial’s earnings remained in line with the Zacks Consensus Estimate in the first and second quarters of 2010.

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