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USANA Health Sciences

USNA

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USANA Health Sciences, Inc. (USNA - Snapshot Report) has been enjoying positive earnings momentum following a strong second quarter and an upbeat guidance for 2012. Shares for this provider of nutritional and personal care products have climbed significantly of late and are currently near the 52-week high. Moreover, this Zacks #1 Rank (Strong Buy) has delivered positive earnings surprises for six straight quarters with an average beat of 12.2%.

With improving performance in the US and Asia Pacific, especially Greater China, the stock should witness further momentum.

Impressive Second Quarter Results

On July 24, USANA Health Sciences announced that second quarter earnings came in at $1.11 per share, or 20.7% above the Zacks Consensus Estimate of 92 cents and 26.1% above last year’s 88 cents. The year-over-year improvement was led by higher sales, improved gross margins, share repurchases, lower Associate incentive expense and a lower effective tax rate.

Revenues increased 8% year over year to $160.9 million, driven by strong performances in Asia Pacific, as well as in North America and Europe. The April 2012 introduction of the Lifetime Matching Bonus and related promotion also helped sales growth.

Upbeat Guidance

Based on the strong second quarter results and business momentum, USANA Health Sciences raised its outlook for 2012. Net sales are now expected between $630 million and $640 million, up from the previous range of $610 million - $625 million.

The company raised its 2012 earnings guidance to between $4.10 and $4.20 per share from the previous range of $3.60 - $3.70. USANA Health Sciences expects the strong performance to continue due to the Lifetime Matching Bonus and initiatives planned for the second half of 2012.

Earnings Momentum on the Rise

Earnings estimates moved up steadily over the last 60 days. The Zacks Consensus Estimate for 2012 rose 14.4% to $4.20 per share, implying year-over-year growth of 28.8%. For 2013, the Zacks Consensus Estimate advanced 16.1% to $4.62 per share, reflecting year-over-year growth of 10.0%.

Attractive Valuation

USANA Health Sciences is currently trading at a forward price-to-earnings (P/E) of 11.2x, a 30.4% discount to the peer group average of 16.1x. Long-term earnings growth is expected to be 18.0%. Moreover, the company’s return on equity (ROE) is 31.7%, well above the peer group average of 21.5%. Its P/S ratio of 1.12 is well below its peer group average of 3.43.

A Look at the Chart

Shares have jumped 14.3% since announcing the solid second quarter results. The chart below shows that the stock has been trading above its 200-day moving average since May 8. Apart from a few pullbacks, the stock has also been trading above its 50-day moving average and the S&P 500 since early May.

USANA Health Sciences is currently above its 50 and 200 day moving averages of $43.50 and $38.09, respectively. Volume is quite strong, averaging roughly 109K daily.

Salt Lake City, Utah based USANA Health Sciences is focused on the development and manufacturing of nutritionals and personal care products. The company, which sells its products through a global network marketing system, operates primarily in two geographic regions: North America/Europe and Asia Pacific. Primary product lines at USANA Health consist of USANA Nutritionals (Essentials and Optimizers), USANA Foods, and Sensé. Founded in 1992, the company has a market cap of $678.72 million.

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