Hain Celestial Shares Fall After JPMorgan Cuts Rating, Predicting Disappointing Earnings

NEW YORK (AP) -- Shares of Hain Celestial Group Inc. dropped Thursday after a JPMorgan analyst downgraded the organic food company, predicting disappointing fiscal third-quarter results.

Shares fell $1.25, or 4.4 percent, to $27.47. The stock earlier traded as low as $26.50.

Analyst Pablo Zuanic downgraded the stock to "Underweight" from "Overweight." He wrote in a note to investors that lower sales growth and Hain's inability to raise prices has prompted concern that the company's earnings will disappoint in the quarter and the 2009 fiscal year ahead.

Zuanic wrote that although the company's management has told investors and analysts not to focus too much on its Celestial tea sales, tea still accounts for about one-fifth of the company's earnings. He added that tea sales trends have been disappointing as well.

Furthermore, Hain appears to be offering lower prices -- a mistake in an environment of increasingly high commodity costs, Zuanic said.

He added that Hain should either focus more on its own products or made acquisitions of higher-margin products a priority, rather than acquiring companies that make lower-margin products like turkey or bread.

Earlier this month, Hain acquired Daily Bread Ltd., a U.K. food producer. The company bought Pilgrim's Pride Corp.'s turkey business in March.