Please ensure Javascript is enabled for purposes of website accessibility

Instant Analysis: Hain Celestial Cuts FY, Q2 2016 Guidance

By Eric Volkman - Jan 13, 2016 at 1:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Company's quarterly estimates fall below analyst estimates.

What happened?
The tea cup is half-empty or half-full, depending on your disposition. Natural-foods purveyor Hain Celestial Group (HAIN 0.37%) has released its quarterly guidance and updated its annual guidance. For its current Q2 2016, the company now expects net sales to come in at $740 million to $760 million, with net profit of $0.53 to $0.56 per diluted share. Both ranges are lower than analyst expectations, which were for a top-line of $767 million, and EPS of $0.57.

Meanwhile, Hain Celestial shaved its guidance for the entirety of fiscal 2016, saying it now anticipates net sales of $2.90 billion to $3.04 billion for the year, with EPS of $1.95 to $2.10. The company's prior expectation was for $2.97 billion to $3.11 billion, and $2.11 to $2.26, respectively.

Does it matter?
Nobody particularly likes a guidance cut, and not surprisingly, Hain Celestial's share price dipped in the wake of the Monday announcement. Yet even if it meets those diminished expectations, it will still have shown growth. Those new annual projections shake out to 7% to 12% growth on the top line, and a 4% to 12% improvement in EPS.

Hain Celestial was a growth superstar for quite some time; it managed to increase its sales at double-digit percentage rates for a highly impressive 20 quarters in a row. But no company is made of magic fairy dust, and sooner or later, most settle into a more mature stage.

What's helping this process along is intensified competition, particularly among manufacturers. Every old-line food producer, it seems, is piling into the natural/organics segment, and these competitors are tough. Hormel (HRL 0.35%), to name but one, found it worthwhile to pay $775 million for a "healthy food" manufacturer, in this case, organic processed-meats company Applegate Farms. That doesn't quite make Hormel a direct competitor to Hain Celestial, at least not yet, but it shows that the segment is too juicy and appealing for hungry incumbents to ignore.

In the pure-play natural/organic segment, Hain Celestial is one of the best companies on the market, in my opinion. It will probably continue to post encouraging growth numbers, guidance cuts notwithstanding. But competition will only intensify. There are more than a few companies like Hormel out there, and they're more than happy to eat Hain Celestial's lunch.

Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Hain Celestial Group, Inc. Stock Quote
The Hain Celestial Group, Inc.
$24.66 (0.37%) $0.09
Hormel Foods Corporation Stock Quote
Hormel Foods Corporation
$50.82 (0.35%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.