Specifically, the company has not been filing its quarterly reports, going back to 4Q16, due to possible accounting irregularities. It said it identified concessions that were granted to certain distributors in the U.S and that it was evaluating whether the revenue associated with those concessions was accounted for in the correct period. Last November, HAIN reported that an independent audit committee found no evidence of wrongdoing and that it began implementing a remediation plan to strengthen its internal controls.
However, the company had not yet completed its internal accounting review, so, it still was not filing its 10-Qs. Furthermore, HAIN reported on February 13 of this year that the SEC became involved, issuing a subpoena for the company. This news tanked the stock by about 12%. Shortly thereafter, a couple prominent funds (Appaloosa & Kerrisdale) closed their HAIN positions.
On May 11, HAIN issued some potential good news, stating that its internal accounting review was nearing its completion and that it expected to file its 10-Q for the quarter ended December 31, 2016 by the end of May. Then, on June 22, this good news was confirmed as the company reported that no material changes were needed to its previously reported financial results. This essentially lifted a key overhang on the stock as the issue was put to rest.
Unfortunately, in addition to the announcement that it had completed its review, HAIN issued downside Q4 EPS and revenue guidance that was well below expectations. So, the stock actually dropped that day and the next, before reversing sharply higher and going on a sharp run higher through the end of July.
It should also be noted that all throughout this time, HAIN has been the subject of acquisition speculation. On June 30, CNBC reported that while it was not hearing anything specific regarding an outright acquisition of the company, there may be some interest in some of HAIN's specific brands.
Now, circling back to its Q4 results. HAIN reported EPS of $0.43, which is at the high end of the $0.40-$0.43 downside guidance it provided on June 22. Revenue fell 1.7% year/year to $725.1 million, at the mid-point of its $715-$735 guidance. In the press release, management commented that it achieved sales growth in each of its business segments on a constant currency basis. More specifically, HAIN saw strength in its Terra (chips), Seasonings, Imagine, and Alba Botanica product lines.
What's really driving the stock higher today, though, is its upside FY18 EPS and revenue guidance of $1.63-$1.80 and $2.967-$3.036 billion. After a difficult stretch for the company, the bullish outlook certainly is welcomed news. HAIN is expecting its new "Project Terra" to drive stronger results this fiscal year. Project Terra is based on shifting its investments into its highest growth categories -- baby, healthy snacking, personal care, fresh living, healthy pantry, and cultivate -- and identifying brands that are not profitable or growing.