The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s stock price closed up just shy of 11% on Thursday and has largely held those gains since after the leading organic and natural products producer beat revenue and earnings estimates when it released its fiscal fourth-quarter and full year 2013 results on Wednesday, Aug. 21.
First, a brief recap of the quarterly results:
- Revenue rose 32.1% to $463.5 million
- Adjusted EPS rose 38.3% to $0.65, beating estimates of $0.62
- GAAP EPS increased 6% to $0.53
1. Don’t be a fool, stick with The Fool!
I say this light-heartedly. However, I did just publish an article calling The Hain Celestial Group, Inc. (NASDAQ:HAIN) an attractive investment. Additionally, the stock has a rating of five (out of five) stars on Motley Fool Caps, so many fellow Fools like it, too.
Much of the sentiment going into earnings was neutral, with many citing high commodity (input) costs and valuation as concerns. While commodity costs are a legitimate concern, The Hain Celestial Group, Inc. (NASDAQ:HAIN) is one of the largest organic commodity purchasers. As such, it surely has more bargaining power than smaller players. Additionally, producers in the organic and natural niche are in a better position to push price increases along to consumers than conventional food producers. Consumers who purchase these products are generally less price-sensitive. Couple that with fewer brands choices, and you have a winning investment recipe.
2. Organic products remain a strong growth market
Organic food sales in the U.S. soared from $11 billion in 2004 to $27 billion in 2012, and grew at an annual rate of 7.4% in 2012. Given that organics account for less than 5% of overall grocery sales, there’s still plenty of growth potential left.
The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s organic growth rate (for existing brands, excludes acquisitions within the year) for the quarter was in the high single-digits. Furthermore, The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s U.S. consumption, measured by Nielsen, was up 7.7% over the past four weeks, according to Founder & CEO Irwin Simon.
3. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is becoming a more international company
The company’s acquisitions have been U.K.-heavy of late, which has considerably increased its Hain Daniels segment’s sales. Here’s the relevant info:
|Segment||Sales F Q4 2013||% of Total||Sales F Q4 2012||% of Total||Y-O-Y Sales Increase|
|Rest of World||$57.1||12||$51.5||15||10.8%|
Data from company’s quarterly report
The company’s objective is to get to a 50% U.S. to 50% all-other split, according to Simon.
4. Growth drivers include baby food, nut butters, greek yogurt & personal care products
Of the company’s 30+ brands, these had double-digit sales growth:
- Earth’s Best — organic baby food
- MaraNatha — seed and nut butters
- Spectrum — organic and natural culinary and nutritional oils
- Greek Gods — Greek yogurt
- Linda McCartney — U.K.-based; vegetarian and vegan foods
- Danival — French-based; wide range of organic products
- Alba Botanica and Jason – personal care products
Organic baby food — especially in resealable pouches — is becoming an increasingly popular product line. In addition to top-performing Earth’s Best, Hain now has another organic baby food brand. In fiscal 2013, it acquired Ella’s Kitchen, a leading brand sold primarily in the U.K., U.S., and Scandinavia.
MaraNatha’s superior performance didn’t surprise me, given my recent, “Profit From the Many Going Nuts Over All Things Almond.” Global demand for almond butters and almond milk is sharply rising. WhiteWave Foods Co (NYSE:WWAV) is also benefiting from consumers’ growing preference for almond products. It produces the Silk line of non-dairy beverages, including almond and soy milks. WhiteWave Foods Co (NYSE:WWAV)’ almond milk sales were greater than its soy milk sales — a first — during its most recent quarter.