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Hain Celestial Emerges From Cloud Of Accounting Uncertainty

Hain Celestial HAIN Stock: Rally After Internal Audit Committee Finds No Evidence Of Intentional Wrongdoing

Hain Celestial Group Inc HAIN announced Wednesday after the market close that an internal audit committee appointed to probe into concessions with respect to certain distributors in the United States has found no evidence of intentional wrongdoing in connection with Hain Celestial's financial statements.

The stock reacted promptly with a 11.95 percent rally in the after-hours session.

However, the company said in the release that it will not be in a position to release financial results until the internal accounting review and the audit process is completed.

Stock To React Favorably

UBS said it expects the company's stock to react favorably to the news. In the absence of a full conclusion to the ongoing audit process, which is separate from the independent audit committee, the firm left its price target and earnings forecasts for the company unchanged. The firm said it would revisit its financial forecasts and fundamental outlook once the audit process is complete and the company releases its historical earnings.

UBS has a Sell rating and a $33 price target for the shares of the company.

Accounting Review To Have Non-material Impact On Earnings

Jefferies believes the most likely outcome of the accounting issue is limited to timing of concessions offered to certain distributors, and there are no material restatements. The firm expects a resolution or at least another update on or before December 27, which is the deadline for the 2016 and first quarter of 2017 financial statements according to its credit agreement.

The firm also noted that the 1.3 percent sales growth predicted by Nielsen for the four weeks ended November 5, represented a slowdown from the 2.9 percent over the four weeks ended October 8. This was also below the firm's estimate. Despite sales remaining below-par, Jefferies noted that Hain's top nine brands, accounting for about 65 percent of the total sales, have seen significant increase in sales in recent months. The weakness was mostly in the tail, with the firm surmising that the weakness could be a deliberate attempt on the part of the company to prune the tail portfolio.

The firm believes its 2017 estimate is appropriately conservative, given that it does not expect a major margin reset.

Jefferies maintains its Buy rating and a $50 price target for Hain Celestial shares.

SunTrust Stays Sidelined Until it Has More Color

SunTrust views the issue at Hain Celestial to be just a revenue recognition issue, and therefore, anticipates sales that were expected in the fourth quarter to be pushed to the first quarter of 2017. The firm believes the company will release its fourth quarter results before the end of the year and also give an updated outlook for 2017.

Going by the company commentary on business trends given in early August and the Nielsen data over the past few months, the firm expects the guidance to be below previous estimates. The firm predicted that the stock would move higher on Thursday on the lack of intentional wrong doing and the high short interest.

However, the firm does not recommend the stock at this point, given the lack of visibility into the company's restated financial results and guidance. Until more color is obtained, the firm said it is staying in the sidelines.

SunTrust maintains its Hold rating on the shares of Hain Celestial.

At last check Thursday, shares of Hain Celestial were rising 8.59 percent to $38.90 on over 3 times their average volumes. The shares went on to close the day at $38.72.

DateFirmActionFromTo
Nov 2016Atlantic EquitiesUpgradesUnderweightNeutral
Nov 2016Bank of AmericaUpgradesUnderperformNeutral
Oct 2016SusquehannaInitiates Coverage OnPositive

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