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Could Hain Celestial’s Bottom Line Be Pressured in 2018?

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Updated

Fiscal 2018 guidance

In fiscal 2018 (ending June 20, 2018), Hain Celestial now expects adjusted EPS (earnings per share) of $1.64–$1.75, instead of $1.63–$1.80. Despite a tax rate benefit of $0.08–$0.09 per share, the company has tightened its fiscal 2018 adjusted EPS guidance due to ongoing marketing and brand awareness investments and higher commodity costs.

The company is cutting down on costs elsewhere under its Project Terra initiative. The company is expecting to save $100 million in costs in fiscal 2018.

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Analysts project the company to report adjusted EPS of $1.66 in fiscal 2018, representing 36% growth YoY (year-over-year). In fiscal 1H18, the company reported adjusted EPS of $0.64, compared with $0.46 in fiscal 1H17. Higher operating and gross profits and lower tax boosted its bottom line. The company expects the tax rate in fiscal 2018 to be ~26% due to the Tax Cuts and Jobs Act.

Cash position

As of December 31, 2017, the company had cash and cash equivalents of $139.2 million and had long-term debt of $742.1 million. The company generated cash from operations of $25.4 million.

In fiscal 2018, the company expects cash from operating activities of $200 million–$235 million. Capital expenditure is projected to be ~$75 million.

Lower tax rate to improve peers’ bottom lines

Retailers across the spectrum have raised their adjusted EPS guidance due to the lower tax rate. For instance, due to a tax benefit of $0.25 per share, Campbell Soup (CPB) upped its fiscal 2018 EPS growth rate to 2%–4% to $3.10–$3.17, against its earlier projected decline of 1%–3%. Conagra Brands (CAG) now expects adjusted EPS from continuing operations of $2.03–$2.05 instead of $1.95–$2.02. Share buybacks, productivity enhancement measures, and lower tax are likely to drive the company’s earnings.

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