Hain Celestial (HAIN) has had back to back beats of the Zacks Consensus Estimate. Both beats produced big moves for the stock, and with analysts raising their estimates the stock is now a Zacks Rank #1 (Strong Buy). Today, HAIN is the Bull of the Day today.

Guiding Higher

HAIN is still basking in the glow of a strong earnings report back on August 20. The company beat the Zacks Consensus Estimate by a penny and guided FY2015 well above top line expectations.

The bottom line guidance was for a range of $3.72-$3.90 when the broader market consensus was calling for $3.73. That technically translates into an 'inline' guide, but at the midpoint of the range, which is where most analysts will likely land, it is a guide higher.

Aggressive Growth investors not only like to see companies with strong revenue growth, they like to see stocks that exceed expectations. Exceeding expectations generally results in multiple expansion.

Company Description

The Hain Celestial Group makes and sells organic and natural products in the United States, the United Kingdom, Canada, and Europe. Its grocery products include infant formula, rice, non-dairy beverages, and frozen desserts as well as a host of other organic goods. The Hain Celestial Group was founded in 1993 and is headquartered in Lake Success, New York.

Revenue Expectations and Price

The Zacks Rank focuses on earnings estimates, but I want to show you what it looks like when a stock sees higher topline expectations. The chart below shows forward revenue estimates and an overlay of the stock price. It is clear that there has been growth in this story, but the most recent big jumps in the green line tell us the revenue growth is going to continue. It should be noted that the revenue growth has a way of helping to lift the stock higher.

HAIN Sees Estimates Moving Higher

The Zacks Consensus estimate for HAIN started out this year at $3.61 and stayed at that level for three months. As the food group became a hot commodity, we saw analysts increase estimates for HAIN in April and May, but not by that much. Following a beat, the number moved from $3.68 in May to $3.72 in June. By the end of August the Zacks Consensus Estimate bounced up again to $3.83 which is where it stands now.

The 2015 Zacks Consensus Estimate followed a similar path, starting the year just short of $4.00 and lifting after each beat to the current level of $4.37. That means there is an implied earnings growth rate of 14%.

Earnings History

Prior to the string of two consecutive beats, HAIN had a fairly solid track record. The December 2013 quarter was a miss of a penny, and the stock was sent lower by more than 4% in the session following the miss. The last miss before that was back in March of 2010, so there was a long stretch of beats or earnings meets.

Following the most recent beats, the stock has moved quite a bit. The March 2014 quarter was reported in early May, and the beat of $0.02 helped push the stock higher by 8%. The next quarter was reported in August and the one cent beat and strong guidance was the catalyst to send the stock higher by more than 10% in the session following the release.

Valuation

Having a good track record of beats and raises does wonders for valuation multiples. HAIN is trading at a premium to the industry average on all the metrics that investors tend to use when looking at a stock. The trailing PE of 32x is well above the 20x industry average while the forward multiple of 27x isn't showing as big of a gap to the 18x industry average. The price to book multiple of 3.2x is ahead of the 2.4x industry average and the price to sales multiple of 2.4x is more than double the industry average.

The Chart

The price and consensus chart is a very helpful tool developed by Zacks. It shows how the earnings estimates help guide the stock, so as estimates move higher, the stock price generally follows along. HAIN as a Zacks Rank #1 (Strong Buy) is no exception to that idea. The recent move much higher in earnings is likely to help guide stock to new highs.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

HAIN CELESTIAL (HAIN): Free Stock Analysis Report


Zacks Investment Research