Analyst Note
| Rebecca Scheuneman, CFA |While we were disappointed in no-moat Hain Celestial’s results for the fiscal third quarter ended March, we view the 20% drop in its stock as an overreaction, leaving the shares attractively valued, even after the high-single-digit percentage reduction in our $42.50 fair value estimate that we expect to make. European sales fell 8% in organic constant currency, although we expect most of the pressure to be transitory. Hain suffered a 4% hit as a deal to provide private-label plant-based beverages terminated sooner than expected, but given its low-cost position and strong demand for the product, we think this business will be fully replaced by January. Its European sales took an additional 3% hit when price negotiations stalled with a few large retailers and Hain opted to hold shipments, although all price increases are now in place as proposed and shipments have resumed. Finally, European sales were pressured from consumers returning to restaurants (after being locked down last year), although this is the last quarter of difficult comparisons. We plan to reduce our fiscal 2022 consolidated organic sales growth forecast to flat from 5% previously. Conversely, Hain’s North American organic sales grew 8.5%, with volume remaining resilient in the face of price increases and most brands realizing market share gains. While high gasoline prices are leading some consumers to trade down to lower-priced fare, we think Hain’s elasticities will continue to be resilient, given the company's affluent consumer base.