Today’s stock market
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Healthcare stocks surged on the unveiling of the Senate healthcare bill, sending the Health Care Select Sector SPDR ETF (NYSEMKT:XLV) up 1%. Retail stocks rebounded from recent weakness, and the SPDR S&P Retail ETF (NYSEMKT:XRT) rose 0.7%.
Hain reports — finally
Hain Celestial released long-awaited financial results for the last four quarters, setting off swings in the share price before ultimately ending the day down 1.5%. The company had undertaken a review of accounting issues and had not released results for over a year. Hain faced a potential delisting of its stock if it didn’t report by the end of the month. Today, the company announced the replacement of the CFO, a new $250 million stock buyback program, and gave guidance for the remainder of 2017 and for fiscal 2018.
For the first nine months of fiscal 2017, sales were $2.1 billion, flat compared with the previous year but up 4% in constant currency terms. Sales in the U.S. were down 6%. Adjusted EPS dropped to $0.79 from $1.42 in the first three quarters of fiscal 2016. Management blamed the poor showing in the U.S. on a number of one-time events such as inventory adjustments by customers, but admitted that pricing pressures were a factor.
Hain emphasized that the accounting review did not result in any material change to previously reported results, and gave an upbeat forecast for improved profitability in 2018. The company expects a sales increase of 4% to 6% next year and adjusted EBITDA to increase from a projected $270 million-$275 million this year to $370 million-$375 million in 2018.
Analysts on the call seemed concerned that the company was dismissing the effect of pricing pressures, questioning whether the recently announced merger of Amazon and Whole Foods Market may accelerate grocery price deflation, and whether the phenomenon could spread to overseas markets as well. Management cited the increased awareness of healthy food and sales growth it believes will be a result of the merger, and pointed to an expanded internal cost savings program that should prop up margins and provide resources for increased marketing investments.
Investors are no doubt relieved to see financial information from the company, but seem conflicted as to the outlook for the business going forward.
Cloud business propels Oracle
Oracle became the latest software vendor to report strongly higher sales of its cloud-based offerings. Total revenue for fiscal Q4 grew 3% to $10.9 billion, and non-GAAP earnings per share came in at $0.89, up 10%. Analysts were expecting earnings of $0.79 on revenue of $10.5 billion. High growth from the company’s cloud software offerings was responsible for the positive surprise, with cloud revenue surging 58% to $1.4 billion. The stock soared 8.6% and hit an all-time high on the news.
Oracle CEO Safra Catz said in the press release, “We continue to experience rapid adoption of the Oracle Cloud led by the 75% growth in our [Software-as-a-Service] business in Q4. This cloud hyper-growth is expanding our operating margins, and we expect earnings per share growth to accelerate in fiscal 2018.”
Oracle is saddled with a slow-growing legacy software business and a shrinking server hardware unit, but last year’s purchase of cloud software vendor NetSuite is fueling the company’s growth in one of the hottest areas of technology. Oracle is focusing on providing complete solutions in the cloud space, and investors are obviously pleased with its results so far.
John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Jim Crumly owns shares of Amazon and Whole Foods Market. The Motley Fool owns shares of and recommends Amazon, Hain Celestial, and Whole Foods Market. The Motley Fool owns shares of Oracle. The Motley Fool has a disclosure policy.
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