The Hain Celestial Group, Inc. HAIN posted second-quarter fiscal 2023 results, wherein sales lagged the Zacks Consensus Estimate while earnings beat the same. Both the top and the bottom line fell from the year-ago fiscal quarter’s reported figure. However, management reaffirmed its view for fiscal 2023.
Shares of this manufacturer, marketer, distributor and seller of organic and natural products have lost 5.8% in the past six months against the industry’s 0.2% rise.
Quarter in Detail
Hain Celestial posted adjusted earnings of 20 cents a share, which outpaced the Zacks Consensus Estimate and our consensus estimate of 14 cents each. However, the bottom line significantly plunged from 36 cents reported in the prior-year fiscal quarter.
The Hain Celestial Group, Inc. Price, Consensus and EPS Surprise
The Hain Celestial Group, Inc. price-consensus-eps-surprise-chart | The Hain Celestial Group, Inc. Quote
Net sales of $454.2 million missed the Zacks Consensus Estimate of $456 million but came ahead of our consensus mark of $453.6 million. The top line dipped 5% from the year-ago fiscal quarter’s reported figure. After foreign exchange adjustment, acquisitions, divestitures and discontinued brands, net sales slipped 2% from the year-ago fiscal quarter’s reported figure.
Adjusted gross profit of $103.9 million fell 11.5% from the prior-year quarter’s tally, while adjusted gross margin contracted 170 basis points (bps) 22.9% from the year-ago fiscal quarter’s reported figure.
Adjusted operating income was $35.4 million in the reported quarter, down 22.7% from the year-ago fiscal quarter. Also, the adjusted operating margin contracted 180 bps from the year-earlier fiscal quarter to 7.8%.
Adjusted EBITDA on a constant-currency basis dropped 11.1% from the year-ago fiscal quarter’s reported figure to $52.7 million, while adjusted EBITDA margin fell 144 bps to 11%.
Net sales in the North America segment rose 2.7% from the year-ago fiscal quarter’s reported figure to $282.4 million. After currency movements adjustment, acquisitions, divestitures and discontinued brands, net sales rose 2% owing to the retailer inventory adjustments, particularly in tea and soft sales in personal care. This was somewhat offset by increased sales of snacks.
Segment-adjusted operating income jumped 12% to $32.3 million, mainly aided by pricing increases, reduced marketing spending and productivity. The segment’s adjusted EBITDA on a constant currency basis amounted to $38.8 million, up nearly 16%. Adjusted EBITDA margin expanded 150 bps to 13.6%.
International net sales declined 14.9% from the year-ago fiscal quarter’s reported figure to $171.8 million. Upon adjusting for foreign currency fluctuations, net sales dropped 3% due to softness in plant-based categories in Europe.
Segment-adjusted operating income tumbled 55% to $12.5 million due to lower gross profit and sales coupled with elevated energy and supply-chain costs as well as under-absorption of overhead expenses at the company’s manufacturing facilities. Adjusted EBITDA on a constant currency basis was $21.9 million, down 36% from the year-ago fiscal quarter’s reported figure. Adjusted EBITDA margin contracted 580 bps to 11.2%.
Hain Celestial ended the reported quarter with cash and cash equivalents of $43.4 million, long-term debt (excluding the current portion) of $870.8 million and total shareholders’ equity of $1,108.6 million.
This presently Zacks Rank #4 (Sell) player reported cash used in operating activities of $2.7 million and a negative operating free cash flow of $16.7 million during the second quarter year-to-date period of fiscal 2023.
Hain Celestial reiterated guidance for adjusted net sales and adjusted EBITDA on a constant currency basis in the range of a decline of 1% to a rise of 4% from the year-ago fiscal period’s reading. Management anticipates currency exchange headwind to be roughly $85 million and $10 million for adjusted sales and adjusted EBITDA, respectively.
This is likely to be backed by stable North America top-line results with moderate price elasticities, International performance reverting to growth in the second half along with greater pricing efforts, gains from private label offerings and the lapping of the starting of the Russia-Ukraine war along with the loss of the co-manufacturing contract. Moreover, the overall gross margin progressed from the prior year on continued improvement in supply-chain results with greater service levels, productivity and cost management.
It forecasts generating incremental positive cash flow during the second half of fiscal 2023. For the second half, management estimates adjusted net sales growth in low-single digits year over year on a consolidated basis. The adjusted gross margin is likely to increase year over year and sequentially better than the first half on gains from pricing actions. HAIN estimates adjusted EBITDA growth at constant currency for the second half.
Three Better-Ranked Consumer Staples Stocks
Some better-ranked stocks are TreeHouse Foods THS, MGP Ingredients MGPI and Edgewell Personal Care EPC.
TreeHouse Foods, which is a manufacturer of packaged foods and beverages, currently has a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year sales suggests 9.6% growth from the year-ago period’s reported figure. THS has a trailing four-quarter earnings surprise of 56.3%, on average.
MGP Ingredients, which produces and markets ingredients and distillery products, currently carries a Zacks Rank #2 (Buy). MGPI has a trailing four-quarter earnings surprise of 36.3%, on average.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 7.3% and 6.2%, respectively, from the corresponding year-ago reported figures.
Edgewell Personal Care, which manufactures personal care products, currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for EPC’s current financial-year sales suggests 2.5% growth from the year-ago period’s reported figure. Edgewell Personal Care has a trailing four-quarter earnings surprise of 4.1%, on average.
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