On Wednesday, Mizuho Securities adjusted its outlook for Hain Celestial Group Inc. (NASDAQ:HAIN), reducing the price target on the company's shares to $10 from the previous $11 while maintaining a Neutral rating.
The adjustment comes after an analysis of recent food value sales data and a January consumer survey. The data showed a slight year-over-year increase in total food value sales across 120 categories by 1.1% in the four weeks leading up to March 23. This figure was slightly down from the 1.3% increase observed over a 12-week period. The median price rose by 1.6%, but volume decreased by 1.5%.
The report noted that volume trends are beginning to stabilize when compared to a 52-week period, which showed a 2.6% decline. This stabilization may have been aided in part by the timing of the Easter holiday. The analysis suggests that the impact of economization, such as consumers using leftovers more frequently, has likely reached its peak.
Private label share growth in the grocery sector remained modest, increasing by only 20 basis points. The findings indicate that broader cost of living adjustments are exerting a more significant impact on volumes than grocery-specific pricing issues.
Mizuho's top stock picks in the food sector include companies with potential upside to near-term numbers, attractive valuations, and favorable category exposure. These picks are BellRing Brands (NYSE:BRBR), Mondelez International (NASDAQ:MDLZ), Kraft Heinz Company (NASDAQ:KHC), and Nomad Foods (NYSE:NOMD).
The revised $10 price target for Hain Celestial is based on approximately 11 times the estimated CY24E EBITDA, representing a roughly 10% discount compared to U.S. Food peers. This discount is a shift from the five-year average premium of 15%.
The report explains that this new valuation reflects increasing elasticity in the U.S. market and acknowledges the risks associated with larger reinvestment needs and the uncertain success of Away-from-Home velocity. Additionally, Mizuho raised its price target for Utz Brands Inc. to $22 from $19, aligning it with the growth rates of Staples peers.
InvestingPro Insights
In light of Mizuho Securities' recent price target adjustment for Hain Celestial Group Inc., current InvestingPro data provides additional context for investors considering HAIN's stock. The company's market capitalization stands at $652.18 million, and while the P/E ratio is negative at -4.10, indicating past challenges, the forward P/E ratio for the last twelve months as of Q2 2024 is 49.58, suggesting that investors are expecting better earnings in the future. Additionally, the company's price/book ratio as of the same period is 0.65, which may appeal to value investors looking for stocks trading below their book value.
Two key InvestingPro Tips for HAIN are particularly relevant in the current context. First, the stock is considered to be in oversold territory according to the Relative Strength Index (RSI), which could signal a potential rebound opportunity for investors. Second, despite recent price declines, HAIN's valuation implies a strong free cash flow yield, indicating that the company could generate attractive cash returns relative to its share price. While 11 analysts have revised their earnings downwards for the upcoming period, which aligns with the cautious stance taken by Mizuho Securities, it’s worth noting that analysts predict the company will be profitable this year.
For those interested in a deeper dive, there are 6 additional InvestingPro Tips available at: https://www.investing.com/pro/HAIN. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering more comprehensive insights and data to inform your investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.