Back to top

Image: Bigstock

Herbalife (HLF) Stock Up on Better-than-Expected Q1 Earnings

Read MoreHide Full Article

Shares of Herbalife Ltd. (HLF - Free Report) gained 4.5% in after-hours trading on May 4 after the nutritional-products company posted better-than-expected earnings and revenues in the first quarter 2017 and issued an upbeat 2017 outlook.

Quarter in Detail

This weight management company delivered fourth-quarter adjusted earnings of $1.24 per share, which beat the Zacks Consensus Estimate of 87 cents by 42.5%. Earnings were within the management’s guided range of 85 cents to $1.05 per share. Adjusted earnings, however, declined 8.1% year over year due to a 10 cents negative impact from currency.

Net sales of $1.10 billion declined 2% from the prior-year period but the decline was narrower than the guided range of a decline of 5% to 9%. This was the second consecutive quarter of sales decline, after three consecutive quarters of growth in revenues. Currency had a neutral impact on sales in the quarter. Sales also beat the Zacks Consensus Estimate of $1.04 billion by 5.9%.

Sales volume increased 1% in the quarter, up from the expected range of down 1–5%. We note that sales and volumes in China significantly exceeded expectations primarily due to the positive timing of sales and volume resulting from a price increase announced in Mar 2017. As a result, member purchases shifted into the first quarter instead of the second quarter of this year.

Regionally, China recorded growth of 17%, followed by 5% growth in each Asia Pacific and Europe, the Middle East and Africa (EMEA) regions and 4% volume growth in Mexico. Volume growth in Mexico represented the sixth straight quarter of volume growth. However, volume points for South & Central America declined 14% due to weakness in Brazil, while North America witnessed a decline of 5%.

Herbalife’s shares have surged 29.2% on a year-to-date basis, higher than the Zacks categorized Retail-Drug Stores industry’s dip of 0.2%.

Other Financial Update

Herbalife ended the quarter with cash and cash equivalents of $1.78 billion, long-term debt of $2.19 billion, and total shareholders’ equity of $267.4 million.

During the quarter, the company generated cash flow from operations of $175.5 million and incurred capital expenditure of $24.5 million.

In the quarter, the company repurchased 2.1 million shares for $119 million and has approximately $1.38 billion remaining under the new program.

Herbalife LTD. Price, Consensus and EPS Surprise

 

Herbalife LTD. Price, Consensus and EPS Surprise | Herbalife LTD. Quote

Full-Year 2017 Guidance Raised

For full-year 2017, management raised its earnings and sales outlook on the back of upbeat first quarter results. The company now expects adjusted earnings in the range of $4.05−$4.45, up from $3.65−$4.05 per share expected earlier. However, the new guidance is still lower than the 2016 adjusted earnings of $4.85 per share. This includes currency impact of 20 cents, compared with 50 cents expected earlier. On a currency adjusted basis, earnings are expected in a range of $4.25–$4.65 per share, compared with $4.20–$4.60 anticipated earlier.

Herbalife now expects sales to grow in a range of 3.0–6.0%, higher from 0.3–3.3% expected earlier. Volumes are expected to increase 2.0–5.0% in 2017. On a currency adjusted basis, sales are expected to increase 3.6–6.6%.

Q2 Guidance

Herbalife expects sales to fall in the range of 0.5–4.5% due to a decline in volume of 1–5% in the second quarter. On a currency adjusted basis, sales are expected in the range of flat to a decline of 4.0%.

For second-quarter 2017, the company expects adjusted earnings per share to grow in the range of 85 cents–$1.05 per share, which includes an unfavorable currency impact of approximately 4 cents per share. Excluding the currency impact, adjusted earnings are expected in a range of 88 cents–$1.08 per share.

Zacks Rank and Key Picks

Herbalife carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the retail sector are Rocky Brands, Inc. (RCKY - Free Report) , The Children’s Place, Inc. (PLCE - Free Report) and Wal-Mart Stores, Inc. (WMT - Free Report) . While both Rocky Brands and Children’s Place hold a Zacks Rank #1 (Strong Buy), Wal-Mart carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Rocky Brands posted a positive surprise of 42.9% in the preceding quarter. While Children’s Place has expected long-term earnings growth of 8.00%, Wal-Mart has expected long-term earnings growth of 6.1% for the next three to five years.

More Stock News: 8 Companies Verge on Apple-Like Run

Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.

A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>

Published in