Why Hain Celestial Shares Dropped

Is this meaningful? Or just another movement?

Feb 5, 2014 at 4:10PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Hain Celestial Group (NASDAQ:HAIN) were looking less than heavenly today, falling as much as 12% after a disappointing earnings report.

So what: The maker of organic and natural foods including Garden of Eatin, said sales improved 18%, to $535 million, slightly below expectations of $536.5 million, as earnings hit $0.87, meeting expectations. CEO Irwin Simon said he was "pleased" with the second-quarter results, but noted a decline in gross margin due to higher commodity costs, as gross margin dropped 200 basis points, to 26.7%. Still, earnings per share increased 30% as the company controlled SG&A costs.

Now what: Hain also updated its guidance due to a recent acquisition of Basmati rice-maker Tilda, and now expects revenue of $2.115 to $2.145 billion, and EPS of $3.07 to $3.15. The analyst consensus sits at $2.14 billion and $3.11 a share. Considering the above numbers, Hain's report wasn't particularly bad and, as a high-priced stock, it's likely getting punished for the slight top-line miss; but the stock gained through most of the session after opening lower, finishing the day close to 6% down. That reaction indicates the market believed the sell-off to be overdone.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Hain Celestial. The Motley Fool owns shares of Hain Celestial. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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