Hain Celestial (NASDAQ:HAIN) Misses Q1 Sales Targets
Natural food company Hain Celestial (NASDAQ:HAIN) missed analysts' expectations in Q1 CY2024, with revenue down 3.7% year on year to $438.4 million. It made a non-GAAP profit of $0.13 per share, improving from its profit of $0.08 per share in the same quarter last year.
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Hain Celestial (HAIN) Q1 CY2024 Highlights:
- Revenue: $438.4 million vs analyst estimates of $463.4 million (5.4% miss)
- Adjusted EBITDA: $43.8 million vs analyst estimates of $39.2 million (11.7% beat)
- EPS (non-GAAP): $0.13 vs analyst estimates of $0.07 ($0.06 beat)
- Lowered full year guidance for organic sales growth and adjusted EBITDA
- Gross Margin (GAAP): 22.1%, up from 21.4% in the same quarter last year
- Free Cash Flow of $30.24 million, up 104% from the previous quarter
- Organic Revenue was down 3.7% year on year
- Market Capitalization: $598.3 million
“We have taken strategic actions to simplify our portfolio and operating footprint to reduce complexity in our business and strengthen our balance sheet, which has enabled us to drive gross margin expansion, unlock operating cash flow and reduce our debt leverage,” said Wendy Davidson, Hain Celestial President and CEO.
Sold in over 75 countries around the world, Hain Celestial (NASDAQ:HAIN) is a natural and organic food company whose products range from snacks to teas to baby food.
Shelf-Stable Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
Hain Celestial carries some recognizable brands and products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, Hain Celestial can still achieve high growth rates because its revenue base is not yet monstrous.
As you can see below, the company's revenue has declined over the last three years, dropping 4.6% annually. This is among the worst in the consumer staples industry, where demand is typically stable.
This quarter, Hain Celestial missed Wall Street's estimates and reported a rather uninspiring 3.7% year-on-year revenue decline, generating $438.4 million in revenue. Looking ahead, Wall Street expects sales to grow 4.9% over the next 12 months, an acceleration from this quarter.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Hain Celestial's free cash flow came in at $30.24 million in Q1, up 40.1% year on year. This result represents a 6.9% margin.
Over the last eight quarters, Hain Celestial has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 1.9%, subpar for a consumer staples business. However, its margin has averaged year-on-year increases of 6 percentage points over the last 12 months. Continued momentum should improve its cash flow prospects.
Key Takeaways from Hain Celestial's Q1 Results
We were impressed by how significantly Hain Celestial blew past analysts' EPS expectations this quarter. On the other hand, its revenue unfortunately missed analysts' expectations and its organic revenue missed Wall Street's estimates. Looking forward, full year guidance for organic sales growth and adjusted EBITDA were lowered. Overall, this was a mediocre quarter for Hain Celestial. The stock is flat after reporting and currently trades at $6.61 per share.
Hain Celestial may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
