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Hain Celestial 1Q 2014 Earnings Preview

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November 04, 2013 – Comments (0) | RELATED TICKERS: HAIN

Hain Celestial (HAIN) reports its 1Q FY2014 results tomorrow, and I hope to provide a brief summary here in the next couple days once I get a chance to look at the report. 

I'm particularly interested in Hain's cash flow production, which leveled off last year at $120.96 million. In the 1Q 2013 last year, Hain generated $27.16 million in operating cash flow. Let's see if this fiscal year gets off to a strong start with regard to cash flow production. Hain has issued a substantial chunk of debt in the past year (approximately $275 million), which is fine so long as the business is able to generate sufficient cash flow. 

I always take earnings guidance with a grain of salt (especially analyst guidance), but Hain has set its EPS estimate for FY 2014 between $2.95-3.05 (representing an approximate 16%-20% increase from its current EPS of $2.41). 

Presently Hain is trading at a P/E of 34.34. This is a reasonable number provided Hain is able to maintain its earnings growth rate over the next several years. Hain is a long-term play with a solid brand portfolio of organic/natural brands and an innovative and experienced Chairman, CEO, and Founder (Irwin Simon). 

If Hain is able to grow earnings at an average rate of 17% for the next five years, and trade at a P/E multiple of 25 in five years, the stock would be close to a double from current levels: 

2.41*(1.15^5)*25 = $132.09

Hain's stock would have to be substantially clobbered for me to add to my position, but at this point I am very comfortable with the Hain position I opened this January. I look forward to the progress of Hain in the coming years.

Here are the financial highlights of Hain's most recent quarter (4Q 2013) and the 2013 fiscal year

Fourth Quarter Fiscal Year 2013

-Record net sales of $463.5 million, a 32.1% increase

-GAAP earnings per diluted share of $0.53, a 6.0% increase

-Adjusted earnings per diluted share of $0.65, a 38.3% increase

-Adjusted EBITDA of $62.7 million, a 37.4% increase

Fiscal Year 2013

-Record net sales of $1,734.7 million, a 25.9% increase

-GAAP earnings per diluted share of $2.41, a 39.3% increase

-Adjusted earnings per diluted share of $2.53, a 34.6% increase

-Record Adjusted EBITDA of $235.8 million, a 31.7% increase

And a brief report summarizing expectations for tomorrow's results and the coming year:

Hain Celestial Group (NASDAQ:HAIN) last announced its earnings results on Wednesday, August 21st. The company reported $0.65 earnings per share for the quarter, beating the analysts’ consensus estimate of $0.62 by $0.03. The company had revenue of $463.50 million for the quarter, compared to the consensus estimate of $454.82 million. During the same quarter last year, the company posted $0.47 earnings per share. Hain Celestial Group’s revenue was up 32.1% compared to the same quarter last year. On average, analysts expect Hain Celestial Group to post $3.02 EPS for the current fiscal year and $3.45 EPS for the next fiscal year.

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