Hain Celestial Up 9.2% In 6 Months: Can The Rally Continue?

The Hain Celestial Group, Inc. (NASDAQ:HAIN) looks appeasing on the back of its robust brand strength, strategic buyouts and other growth initiatives. Also, shares of this Zacks Rank #3 (Hold) have rallied 9.2% in the past six months, comfortably outperforming the industry’s growth of 1.6%. The stock has outperformed the broader Consumer Staples sector’s gain of 3.7% as well.

In fact, a Growth Score of B and long-term earnings growth rate of 14% further boost optimism on the stock.

Let’s Dive Deep

Acquisitions — A Key Growth Driver

Acquisitions have been a key part of the company’s strategy to build market share. The company’s healthy balance sheet enables it to target strategic buyout opportunities. Recently, management revealed that its wholly-owned subsidiary has purchased Clarks UK Ltd. (“Clarks”) that produces natural sweeteners, comprising of maple syrup, honey and carob, date and agave syrups. Further, Hain Celestial is positioned to gain from Whole Foods’ buyout by Amazon.com, Inc. (NASDAQ:AMZN) as it is among the former’s largest supplier.

Apart from widening its geographical presence, the company’s acquisitions have helped attain a strong foothold in the packaged food and grocery market. Furthermore, Hain Celestial seeks to expand in India, Middle East and China. Going forward, we expect the company to gain from these strategic buyouts, thereby leading to incremental sales and profitability.

Solid Brand Strength

With an extensive portfolio of well-known brands, Hain Celestial offers investors one of the strongest growth profiles in the industry. We believe that the stock is poised to surge as the economy revives, and demand for healthier and natural foods as well as personal care products improve. Additionally, rise in consumption, innovative marketing, diverse brand portfolio and expanded distribution are aiding the company's performance.

Cost-Savings to Aid Profitability

Hain Celestial, which began a strategic review under Project Terra in fiscal 2016, expects to generate worldwide cost savings worth $350 million through fiscal 2020 (comprises annual productivity). To achieve these savings, the company intends to optimize plants, co-packers and procurement, besides rationalizing product portfolio.

Consequently, it plans to reinvest the additional savings through brand development and household penetration. Also, management has been taking various other initiatives to augment sales and margin growth. In fact, it focuses on improving profitability through new product introductions and cost-containment efforts as well.

Bottom Line

While Hain Celestial’s strategic endeavors are boosting growth, stiff competition in the food industry and foreign currency headwind remain possible deterrents. Nonetheless, management remains confident of delivering growth, as evident from its net sales projection of 4-6% growth in fiscal 2018. Also, earnings are envisioned to grow nearly 34-48% year over year.

Looking For Solid Food Stocks, Check These

Some better-ranked stocks in the same industry include United Natural Foods, Inc. (NASDAQ:UNFI) and Nomad Foods Limited (NYSE:NOMD) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Natural with a long-term earnings growth rate of 5.8% has surged 36.7% in the past six months.

Nomad Foods pulled off a positive earnings surprise of 26.1% and has advanced 19.6% over the said time frame.

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