Hain Celestial's stock rockets toward a record gain after earnings

By Tomi Kilgore

The natural-foods company extended its streak of quarterly revenue misses, but gross margin improved and cash flow was positive

Shares of Hain Celestial Group Inc. were having their best day ever on Tuesday, after the better-for-you foods company beat fourth-quarter profit expectations as improved gross margin helped offset sales that fell a bit short.

The company, with brands including Celestial Seasonings tea, Garden Veggie and Terra snacks, and Earth's Best food items for kids, also reported a surprise positive in free cash flow.

The stock (HAIN) blasted 30.8% higher toward a five-month high in morning trading. That put the stock on track for its biggest one-day gain since going public in January 1994, with the current record being the 22.1% rally seen on Feb. 5, 2023.

The gain comes after the stock had already soared 11.2% over the previous two sessions off of the 31/2-month closing low of $6.14 on Aug. 22.

The net loss for the quarter to June 30 narrowed to $2.9 million, or 3 cents a share, from $18.7 million, or 21 cents a share, in the same period a year ago.

Excluding nonrecurring items, the company reported adjusted earnings per share of 13 cents, compared with the FactSet EPS consensus of 8 cents.

Sales declined 6.5% to $418.8 million, just shy of the FactSet consensus of $419.4 million.

That marked the fourth straight quarterly sales miss, and the 10th miss in the past 11 quarters, according to FactSet data.

Among Hain's brand groups, sales fell 5% in meal prep to $149 million, dropped 6% in snacks to $121 million, shed 10% in baby and kids to $64 million, and sank 21% in personal care to $29 million, but rose 3% in beverages to $56 million.

Gross margin improved to 23.4% from 22.5%, as cost of sales fell more than sales.

And the company reported free cash flow of $31 million, down slightly from $34 million a year ago, but the average estimate of two analysts surveyed by FactSet was negative $11.8 million.

"Our free cash flow generation drove gross margin expansion, net debt reduction, and improvement in leverage, all while enabling us to invest in developing competencies to pivot to growth," said Chief Financial Officer Lee Boyce, according to an AlphaSense transcript of the post-earnings call with analysts.

For fiscal 2025, the company expects gross margin to increase by at least 1.25 percentage points and projects free cash flow to be at least $60 million.

Despite Tuesday's rally, the stock has still tumbled 24.7% to date in 2024, while the S&P 500 has advanced 17.8%.

-Tomi Kilgore

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08-27-24 1025ET

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