Why Hain Celestial Stock Soared Today

Actions of Hain Celestial (COAT 18.59%) jumped today after the packaged food company posted better-than-expected results in its fiscal fourth-quarter earnings report.

As of 2:57 pm EDT, the stock was up 21.2% on the news.

Image source: Getty Images.

Hain’s profitability initiatives are paying off

The maker of Celestial Seasonings tea and other products missed revenue estimates for the quarter, reporting a 6 percent drop in revenue to $418.8 million, which missed estimates of $421.2 million.

Organic revenue, which excludes divestitures, acquisitions and foreign exchange, fell 4% in the quarter.

While the pullback on the top line was disappointing, investors were impressed by the company’s cost improvements. Adjusted gross margin increased 70 basis points to 23.4% and adjusted net income increased slightly from $10 million to $11 million. Per share, earnings rose from $0.11 to $0.13, which was better than the $0.08 consensus.

Management spoke of progress on its Hain Reimagined strategy in fiscal 2024, with CEO Wendy Davidson saying, “We have moved to a global operating model, reducing geographic complexity and expanding scale.”

The company also reduced its debt balance, with net debt from $775 million to $690 million, and aims to reduce its leverage ratio to two to three times adjusted earnings before interest , taxes, depreciation and amortization (EBITDA).

Can Hain keep climbing?

Hain shares have been struggling for years as shares have fallen sharply over the past decade, but investors are still hoping for a recovery.

For fiscal 2025, the company expects organic sales growth to be flat or better and has called for mid-single-digit adjusted EBITDA growth.

While this shows the company is moving in the right direction, it will take more than flat growth to pull off a turnaround.

For now, investors are probably better off watching from the sidelines.