Sometimes bad things happen to good companies that puts their stock price in the penalty box.
Hain Celestial has been in the penalty box for six months and they should be ready to run once they are released.
I looked at a lot of potential plays this weekend but most companies have earnings over the next three weeks and that means their premiums are inflated. Once the majority of the earnings cycle passes those premiums will decline and we might also have the opportunity to buy some disappointment dips. Until then I will continue to try and find some overlooked opportunities.
HAIN - Hain Celestial - Company Description
The Hain Celestial Group, Inc. manufactures, markets, distributes, and sells organic and natural products in the United States, the United Kingdom, Canada, and Europe. Its grocery products include infant formula; infant, toddler, and kids foods; diapers and wipes; rice and grain-based products; flour and baking mixes; breads, hot and cold cereals, pasta, condiments, cooking and culinary oils, granolas, granola bars, and cereal bars; canned, chilled fresh, aseptic, and instant soups; Greek-style yogurt; chilies and packaged grains; and chocolates and nut butters, as well as plant-based beverages and frozen desserts, such as soy, rice, almond, and coconut. The company's grocery products also comprise juices, hot-eating, chilled and frozen desserts, cookies, crackers, gluten-free frozen entrees and bars, frozen pastas and ethnic meals, frozen fruits and vegetables, cut fresh fruits, refrigerated and frozen soy protein meat-alternative products, tofu, seitan and tempeh products, jams, fruit spreads and jelly, honey, marmalade, and other food products. In addition, it provides snack products, such as potato, root vegetable, and other vegetable chips, as well as straws, tortilla chips, whole grain chips, pita chips, puffs, and popcorn; specialty teas, including herbal, green, black, wellness, rooibos, and chai tea lattes; ready-to-drink beverages comprising organic kombucha and chai tea lattes; personal care products consisting of skin, hair and oral care, deodorants, baby care items, acne treatment, body washes, and sunscreens; and poultry and protein products, such as turkey and chicken products. The company sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, and drug and convenience stores in approximately 70 countries worldwide. Company description from FinViz.com.
Hain had some problems back in August and they said they discovered an accounting problem that could force them to restate earnings. Shares fell from $55 to $35. In November they announced they found no wrongdoing and shares rebounded to $39 ahead of what investors thought would be some positive earnings restatements. We are now in late January and still no earnings. They have a variance from the Nasdaq and creditors that allows them until February to file their 10K and get current with their earnings. There has been a slight upward bias in the stock as we approach that February event. There is no confirmed date for the release.
Since there was no wrongdoing, the earnings restatement should reflect the movement of revenue recognition from one quarter into another. If I recall there was some problem with consideration given to some wholesalers when they received the product on what could be called a consignment basis. In other words they shipped product to a wholesaler and that wholesaler did not have to pay for it until it was sold. Hain has had two quarters to work through those mechanics and when they finally report earnings it should be several quarters at one.
There is nothing wrong with the Hain business. They continue to introduce new products and expand their distribution in more than 70 countries. I could be wrong but I do not foresee a major change in the business or in the financials.
This accounting delay has removed all the premium from the LEAPS. The Jan $45 call is only $3.30. If Hain reports anything close to their prior earnings the stock could be back over $50 very quickly because of the pent up demand.
I looked at buying an insurance put for $1.25 but the LEAP is so cheap and we have 11 months for a recovery that I decided against it.
Buy Jan $45 call, currently $3.30, no initial stop loss.