Hain Celestial (HAIN -1.60%), a leading producer of organic and natural foods, beverages, and personal care products, is slated to report its fiscal second-quarter 2014 earnings for the period ending Dec. 31 on Tuesday, Feb. 4, after the market closes.

Hain will be the first main player in the organic and natural food space to report quarterly earnings, with Annie's next on deck for Feb. 10, followed by Whole Foods Market (WFM) on Feb. 12, and WhiteWave Foods on Feb. 14. Hain and WhiteWave topped both revenue and earnings estimates last quarter, while Annie's beat on revenue but slightly missed on earnings, and Whole Foods Market fell short on revenue and also lowered guidance.

If you know what analysts expect and what to home in on in an earnings report before earnings are announced, you'll be better prepared to make clear-headed decisions if an earnings announcement throws investors a curve ball. So, let's look at what to expect when Hain Celestial reports.

Analysts' Fiscal Q2 EPS Estimate


Change From Year-Ago EPS


FQ2 Revenue Estimate

$537.75 million

Change From Year-Ago Revenue


Earnings Beats Past 4 Quarters

3 (1 on target, no misses)

Fiscal 2014 EPS Estimate

$3.11 (representing 22.9% growth over 2013 EPS of $2.53)

Fiscal 2014 Revenue Estimate

$2.14 billion (representing 23.5% growth)

Source: Yahoo! Finance.

Overall margins and the U.S./U.K. business mix
Analysts are looking for a slight margin expansion, as the consensus is for EPS growth to be slightly more than revenue growth. The consensus has been bumped down a penny from $0.88 to $0.87 over the past month, though analysts have also increased their expectations by $0.07 for fiscal year 2014, which ends June 30. 

Hain's margins slightly contracted last quarter as revenue increased 32.7%, while adjusted EPS rose 26.8%. I didn't view this as a concern since the primary reason was the change in revenue mix, as Hain has been growing its U.K. business, Hain Daniels, faster than its core U.S. business. Hain Daniels, which accounted for 24% of revenue, grew 94% last quarter, while the U.S. business, which accounted for 65% of revenue, grew 24%, and the rest of the world experienced 5% growth. Slimmer margins are to be expected in the early stages of entering and growing a business in a new market.

So, if the U.K. business shows faster-than-expected growth when Hain reports, investors shouldn't get spooked if the company's overall margins don't expand as much as expected, or are even flat. Contraction, however, would be cause for concern, or at least increased vigilance going forward.

Plans to transform BluePrint and Ella's Kitchen into "lifestyle brands"
CEO Irwin Simon stated during last quarter's conference call that Hain has plans to leverage the popularity of BluePrint and Ella's Kitchen, which are acquisitions Hain made in fiscal 2013, by making them into "lifestyle brands." BluePrint is the leading producer of cold-pressed juices in the U.S., while Ella's Kitchen is the best-selling organic baby food brand in the U.K., which Hain started rolling out to the U.S. market in late 2013.

Simon and team move fast, so I'd not be surprised if there was some news on this front, perhaps about planned new product launches. I'd view any news here as a positive, though "no news" shouldn't be considered a negative, in my opinion.

There is huge potential in transforming these brands, especially BluePrint, into lifestyle brands. The BluePrint products are considerably higher-end (a 16-ounce bottle goes for about $9.99 a pop at my local Whole Foods), and the line presents Hain with an ideal jumping-off point from which to expand into a wide array of super-premium products -- and these products typically sport hefty profit margins. There are all kinds of possibilities: yoga products, vitamin supplements, partnerships with weight-loss companies, and even personal care products.

Speaking of Whole Foods, while Hain's products are sold via many retailers and other outlets, Hain is Whole Foods' largest supplier, so good quarterly results might bode well for Whole Foods, which reports on Feb. 12. 

Ingredient supply and production constraints issues
Hain has had a good "problem" recently: Consumers are craving more of its MaraNatha nut and seed butters than it can churn out. The plant that produces the MaraNatha butters runs around the clock, so there are production capacity constraints. Additionally, Hain has been finding it challenging to secure enough almonds and chia seeds for its butters.

MaraNatha sales increased more than 20% last quarter, though growth could have been 30%-plus if the company had been able to fill its out-of-stocks, according to information released during last quarter's conference call.

Hain has also had its production capacity constrained to a lesser degree with respect to its Arrowhead Mills whole grains and DeBoles pasta.

Planned increases in production capacity should be viewed even more positively than usual, given that demand for almond butters has been soaring. Consumers' voracious appetite for almond-based products in general -- most especially milk and butters -- means investors should also focus in on Hain's supply chain situation. Hain's size gives it the bargaining power smaller players don't have, so I'd not be too concerned on this front. I wouldn't view further moderate increases in almond costs too negatively, as core organic and natural food shoppers have largely shown they're not very price sensitive.

Foolish bottom line
Besides focusing on Hain's revenue, earnings, and fiscal year 2014 guidance when it reports next week, investors should home in on the U.S./U.K. business mix and the resultant effect on margins, plans for transforming BluePrint and Ella's Kitchen into lifestyle brands, and plans to alleviate supply constraints.

I'd expect Hain to remain the best way to play the hot organic and natural food space, which is projected to grow about 9% annually through 2020. This is thanks largely to its breadth and depth of offerings, which give it tremendous leverage with retailers when it comes to key shelf space, and its growth-focused management team, which continues to prove it can execute.