If "organic" and "natural" are the two magic words in the food world, then a company like Hain Celestial should be the belle of the ball. With a basket of brands including Terra Chips (vegetable crisps), BluePrint (juice cleanses), and JĀSÖN (crunchy granola soaps, creams and body washes), Hain is offering consumers the very things they say they want. Yet despite this ostensibly enviable positioning, Hain stock is getting hammered. The company has lost 38% of its value in the last year -- thanks in no small part to the stock's 26% plunge in Tuesday trading.
Hain's stock plummet Tuesday is primarily the result of the company announcing that it will delay the release of its fourth quarter earnings results, which it was expected to release this week, because of an accounting issue.
"During the fourth quarter, the company identified concessions that were granted to certain distributors in the United States," Hain said in a press release Monday evening. "The company is currently evaluating whether the revenue associated with those concessions was accounted for in the correct period and is also currently evaluating its internal control over financial reporting."
In this same release, Hain also revealed that it will fail to meet its full-year 2016 financial forecast. The company had been calling for $2.00 to $2.04 in earnings per share and 9% to 10% year-over-year revenue growth.
Put together, the news was bad enough to knock $1.6 billion off of Hain's market cap overnight: shares closed Monday trading at $53.40, and reopened Tuesday morning at $37.90 per share. It stayed in the upper-$30 range for the majority of Tuesday trading, ultimately closing at $39.35 for a 26% loss.
Though more than a dozen law firms have seized upon the news as an opportunity to find investors willing to sue Hain, Wall Street analysts are reacting to the accounting issues with tempered bearishness.
"We continue to believe Hain has a multi-year cost savings story and distribution growth opportunities, but with its realignment of brands in its portfolio expected to take time to bear fruit, uncertainty as to the ultimate impact of accounting questions and disappointing fiscal year 2016 results to expectations, we have limited conviction Hain shares offer much near-term upside," Wedbush analyst Phil Terpolilli wrote in a research note Tuesday. Alongside these comments, Terpolilli downgraded the stock from outperform to neutral and knocked its price target to $37 from $51.
BMO Capital Markets analyst Amit Sharma was slightly more optimistic, saying in a research note that the stock drop was "overdone" and that he believes the accounting issue is not a lingering or long-term problem. He also pointed to parallels with another organic food company that successfully weathered an accounting issue.
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