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What's in Store for Herbalife (HLF) this Earnings Season?
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Herbalife Ltd (HLF - Free Report) is set to report third-quarter 2016 results on Nov 1, after the market closes. Last quarter, it posted a positive earnings surprise of 10.26%.
In fact, this weight management and nutritional products company has managed to beat estimates in the last four quarters, generating an average positive earnings surprise of 21.59%.
Let's see how things are shaping up for this announcement.
Herbalife expects sales to be up 2%–5% and volume growth in the range of 5%–8% in the third quarter. On a currency adjusted basis (excluding the impact of Venezuela price increases tied to foreign exchange rate movements), sales are expected to increase 5.5%–8.5%.
For the third quarter, the company expects adjusted earnings per share in a range of 98 cents to $1.08, including an unfavorable currency impact of approximately 14 cents per share. Without the currency impact (excluding the impact of Venezuela price increases tied to foreign exchange rate movements), adjusted earnings are expected in a range of $1.12–$1.22 per share.
We note that Herbalife is witnessing volume improvement in key markets including the U.S., Mexico and Brazil, primarily impacted by its marketing plan changes, which were implemented in Feb 2015. In fact, the company is seeing sequential improvements in key metrics in these markets and remains encouraged by the positive trends. The company anticipates that these important and effective changes will lead to volume growth in the to-be-reported quarter.
However, unfavorable currency, which is a major headwind for the company, will hurt earnings in the quarter to be reported.
Earnings Whispers
Our proven model does not conclusively show that Herbalife is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Herbalife is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.08. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Herbalife has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Sanderson Farms, Inc. with an Earnings ESP of +9.62% and a Zacks Rank #1.
Sysco Corporation (SYY - Free Report) with an Earnings ESP of +1.70% and a Zacks Rank #2.
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What's in Store for Herbalife (HLF) this Earnings Season?
Herbalife Ltd (HLF - Free Report) is set to report third-quarter 2016 results on Nov 1, after the market closes. Last quarter, it posted a positive earnings surprise of 10.26%.
In fact, this weight management and nutritional products company has managed to beat estimates in the last four quarters, generating an average positive earnings surprise of 21.59%.
Let's see how things are shaping up for this announcement.
HERBALIFE LTD Price, Consensus and EPS Surprise
HERBALIFE LTD Price, Consensus and EPS Surprise | HERBALIFE LTD Quote
Factors to Consider this Quarter
Herbalife expects sales to be up 2%–5% and volume growth in the range of 5%–8% in the third quarter. On a currency adjusted basis (excluding the impact of Venezuela price increases tied to foreign exchange rate movements), sales are expected to increase 5.5%–8.5%.
For the third quarter, the company expects adjusted earnings per share in a range of 98 cents to $1.08, including an unfavorable currency impact of approximately 14 cents per share. Without the currency impact (excluding the impact of Venezuela price increases tied to foreign exchange rate movements), adjusted earnings are expected in a range of $1.12–$1.22 per share.
We note that Herbalife is witnessing volume improvement in key markets including the U.S., Mexico and Brazil, primarily impacted by its marketing plan changes, which were implemented in Feb 2015. In fact, the company is seeing sequential improvements in key metrics in these markets and remains encouraged by the positive trends. The company anticipates that these important and effective changes will lead to volume growth in the to-be-reported quarter.
However, unfavorable currency, which is a major headwind for the company, will hurt earnings in the quarter to be reported.
Earnings Whispers
Our proven model does not conclusively show that Herbalife is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for Herbalife is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.08. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Herbalife has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Avon Products, Inc. with an Earnings ESP of +33.33% and a Zacks Rank #1. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Sanderson Farms, Inc. with an Earnings ESP of +9.62% and a Zacks Rank #1.
Sysco Corporation (SYY - Free Report) with an Earnings ESP of +1.70% and a Zacks Rank #2.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>