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The Hain Celestial Group Inc HAIN

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Hain Celestial’s Turnaround Efforts Boosting Margins More Than Expected, but Shares Look Expensive

Analyst Note

| Rebecca Scheuneman, CFA |

The highlight of no-moat Hain Celestial’s third-quarter earnings report was the improvement in profit margins. Adjusted gross margins expanded 320 basis points to 27.4%, driven by the elimination of low-margin products, supply-chain efficiencies, and the sale of the low-margin U.K. fresh fruit business. Adjusted operating margins increased 390 basis points to 12.1%, given savings from the consolidation of North American operations into one business unit. The margin benefit from selling the fruit business was more material than we expected, and we plan to increase our five-year average gross margins 90 basis points to 27.5% and our five-year average operating margins by 180 basis points to 12.4%. This should result in a mid-single-digit increase to our $34 fair value estimate, but with shares trading above this, we suggest investors remain on the sidelines.

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Company Profile

Business Description

Hain Celestial makes better-for- you natural and organic consumer products, with 69% of fiscal 2020 revenue considered grocery, 15% snacks, 10% personal care, and 6% tea. Some of the company's most recognized brands are Celestial Seasonings (tea), Terra (chips), Garden of Eatin' (chips), Sensible Portions (snacks), The Greek Gods (yogurt), Earth's Best (baby food and care), and Ella's Kitchen (baby food). The company primarily sells in developed markets, including the U.S. (49% of revenue), U.K. (32%), Canada (8%), and Europe (11%). Its products can be found in traditional grocery stores, natural foods supermarkets, specialty health stores, mass-market retailers, club warehouses, drugstores, convenience stores, and restaurants and e-commerce sites.

Contact
1111 Marcus Avenue, Lake Success
New York, NY, 11042
T +1 516 587-5000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Mar 31, 2021
Fiscal Year End Jun 30, 2021
Stock Type Slow Growth
Employees 4,287

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