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HAIN – Hain Celestial (HAIN) Upgraded to Buy: Here's What You Should Know

Hain Celestial (HAIN Free Report) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). This rating change essentially reflects an upward trend in earnings estimates — one of the most powerful forces impacting stock prices.

The Zacks rating relies solely on a company’s changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure — the Zacks Consensus Estimate.

Since a changing earnings picture is a powerful factor influencing near-term stock price movements, the Zacks rating system is very useful for individual investors. They may find it difficult to make decisions based on rating upgrades by Wall Street analysts, as these are mostly driven by subjective factors that are hard to see and measure in real time.

As such, the Zacks rating upgrade for Hain Celestial is essentially a positive comment on its earnings outlook that could have a favorable impact on its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company’s future earnings potential, as reflected in earnings estimate revisions, and the near-term price movement of its stock are proven to be strongly correlated. The influence of institutional investors has a partial contribution to this relationship, as these big professionals use earnings and earnings estimates to calculate the fair value of a company’s shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their bulk investment action then leads to price movement for the stock.

Fundamentally speaking, rising earnings estimates and the consequent rating upgrade for Hain Celestial imply an improvement in the company’s underlying business. Investors should show their appreciation for this improving business trend by pushing the stock higher.

Harnessing the Power of Earnings Estimate Revisions

Empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, so it could be truly rewarding if such revisions are tracked for making an investment decision. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here >>>>.

Earnings Estimate Revisions for Hain Celestial

This organic and natural products company is expected to earn $1.45 per share for the fiscal year ending June 2021, which represents a year-over-year change of 72.6%.

Analysts have been steadily raising their estimates for Hain Celestial. Over the past three months, the Zacks Consensus Estimate for the company has increased 6.2%.

Bottom Line

Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of ‘buy’ and ‘sell’ ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a ‘Strong Buy’ rating and the next 15% get a ‘Buy’ rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.

You can learn more about the Zacks Rank here >>>

The upgrade of Hain Celestial to a Zacks Rank #2 positions it in the top 20% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.

HAIN – Factors to Know Before Hain Celestial's (HAIN) Q2 Earnings

The Hain Celestial Group, Inc. (HAIN Free Report) is likely to register top- and bottom-line growth when it reports second-quarter fiscal 2021 numbers on Feb 9, before market open. Although the Zacks Consensus Estimate for second-quarter earnings has declined by a penny to 28 cents in the past 30 days, the same suggests growth of more than 64% from 17 cents delivered in the year-ago quarter. Moreover, the consensus estimate for quarterly revenues stands at $521.6 million, which indicates an increase of 2.9% from the year-ago quarter.

In the last reported quarter, the company delivered an earnings surprise of 50%. Notably, this organic- and natural-products company delivered an earnings surprise of 24.6%, on average, in the trailing four quarters.

Key Factors to Note

Hain Celestial’s second-quarter performance is likely to have benefited from its transformation strategy. The strategy is aimed at simplifying portfolio, identifying additional areas of productivity, driving top-line growth and improving cash flow. Moreover, well-chalked innovation plans, marketing and assortment optimization efforts have been supporting the company’s top line. Encouragingly, Hain Celestial is gaining from sales growth across the North America and the International segments. In North America, the company’s Get Bigger Brands have been doing well. Markedly, the company has been witnessing increase in consumption of products like tea, yoghurt and snacks alongside personal care products. Its International segment is witnessing growth in areas like non-diary beverages and plant-based proteins.

Management at its first-quarter earnings release had projected mid-single digit sales growth at constant currency after adjusting for divestitures and discontinued brands for the fiscal second quarter. In addition, the company is committed toward making investments in key brands, while simultaneously exiting non-core assets to focus more on high-growth areas. The recent divestiture of its ailing U.K. fruit business, including the Orchard House Foods Limited operations and associated brands, might have boosted performance.

In addition, supply-chain productivity efforts and higher product mix from rationalization efforts have been driving margins. Also, it is on track with boosting automation in plants, rightsizing infrastructure, redesigning engineered products and optimizing pricing. Management had earlier estimated gross margin to rise considerably in the fiscal second quarter and higher adjusted EBITDA versus growth in the second half of the prior year.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Hain Celestial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Hain Celestial Group, Inc. Price and EPS Surprise

Although Hain Celestial has a Zacks Rank #2, its Earnings ESP of -1.18% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Snap-on (SNA Free Report) has an Earnings ESP of +1.21% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yum Brands (YUM Free Report) has an Earnings ESP of +1.62% and a Zacks Rank #2.

YETI Holdings (YETI Free Report) has an Earnings ESP of +6.91% and a Zacks Rank #3.

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