Shares of Herbalife Ltd. (HLF - Snapshot Report) , a global nutrition company, surged 6.7% on Monday Jul 15 as the company won the battle against William Ackman, the billionaire hedge fund manager who had placed a $1 billion bet against Herbalife’s stock in May 2013. Ackman has been assaulting the company by calling it a pyramid scheme since December.
A pyramid scheme is a fraudulent investing plan that cost many people of their hard-earned savings. However, Herbalife’s two billionaire investors -- Dan Loeb and Carl Icahn -- believed in its products and their support helped shield Herbalife’s stock from Ackman’s assault. Icahn has taken a 16.5% stake in Herbalife in 2013 and gained a good return from its investment funds.
In addition, the growing penetration of Herbalife products among U.S. consumers has also fuelled the shares. Rising obesity concerns have shifted the focus of U.S. consumers toward more healthier and nutritious products. Herbalife’s stock has climbed 64.7% on a year-to-date basis.
According to a survey conducted in the U.S. in Jun 2013, 3.3% of the adults in the country had purchased Herbalife products in the past three months. This indicates that Herbalife currently has approximately 7.9 million customers and as many as 95% of Herbalife consumers purchased its Weight Management product.
Herbalife is a global nutrition company that sells weight management products, nutritional supplements, energy, sports and fitness and personal care products worldwide. Herbalife offers its products through retail stores, sales representatives, sales officers and independent service providers.
A Strong Year Ahead
The company is scheduled to release its second quarter 2013 results on Jul 29, 2013. For 2013, Herbalife projects earnings in the range of $4.60 - $4.80 per share, up 3.4% from the previously guided range of $4.45 - $4.65.
The Zacks Consensus Estimate for 2013 stands at $4.81 per share, up 3.4% from the prior year quarter. For 2014, the Zacks Consensus Estimate is $5.52 per share, up 2.6% year over year.
We believe that solid demand for its products (especially weight management products), product innovations and numerous growth strategies will drive the stock going forward.
Other Stocks to Consider
Herbalife holds a Zacks Rank #3 (Hold). Other drug retailers worth considering are AmerisourceBergen Corp (ABC - Analyst Report) , BioScrip Inc (BIOS - Analyst Report) and CVS Caremark Corporation (CVS - Analyst Report) , all of them holding a Zacks Rank #2 (Buy).