It has been about a month since the last earnings report for Nu Skin Enterprises (NUS - Free Report) . Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nu Skin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Nu Skin's Q2 Earnings Beat Estimates, Sales Decline Y/Y
Nu Skin released second-quarter 2020 results, with the top and the bottom line declining year over year. Nevertheless, both the metrics surpassed the Zacks Consensus Estimate.
Management isimpressed with its performance so far this year. Incidentally, the company raised its guidance for 2020.
Nu Skin delivered quarterly earnings of 81 cents a share, which beat the Zacks Consensus Estimate of 67 cents. However, the bottom line decreased 2.5% from earnings of 83 cents reported in the year-ago quarter.
Revenues of $612.4 million fell 1.8% year over year. Nevertheless, the metric surpassed the Zacks Consensus Estimate of $606 million. Second-quarter revenues included a negative impact of 3% (or $19.8 million) from foreign currency fluctuations. On a constant-currency basis, sales inched up 1% driven by increase in customer base.
Sales leaders were 56,036, down 9% year over year, with Mainland China and Hong Kong/Taiwan accounting for majority of the decline. Nonetheless, Nu Skin’s customer base increased 29% year over year to 1,499,900 with rise in all regions except South Korea, Japan and Hong Kong/Taiwan.
Gross profit came in at $458.3 million, down 2.4% from the year-ago quarter’s figure. Gross margin contracted 50 basis points (bps) year over year to 74.8%. Nu Skin’s base business gross margin declined 20 bps on a year-over-year basis to 77.6%. The downside was caused by incremental freight costs stemming from higher demand and coronavirus related costs.
Selling expenses amounted to $248.6 million, which accounted for 40.6% of revenues compared with 39.4% in the year-ago quarter. Meanwhile, general and administrative expenses of $151.6 million accounted for 24.7% of revenues, up from 24% in the year-ago quarter.
Operating income came in at $58.1 million, while operating margin fell year over year from 11.9% to 9.5%.
Revenues across Mainland China declined 21% the prior-year quarter’s level. Further, revenues fell 9% in South Korea, 11% in Southeast Asia and 15% from Hong Kong/Taiwan region. Nevertheless, sales across Americas/Pacific, Japan and EMEA region increased 38%, 5% and 17%, respectively.
Other Financial Details
Nu Skin ended the quarter with cash and cash equivalents of $375.5 million, long-term debt of $319.9 million and stockholders' equity of $792 million. During the quarter, the company paid out dividends of $19.4 million.
In a separate press release, Nu Skin announced a dividend of 37.5 cents per share payable on Sep 9 to shareholders of record as of Aug 29.
Nu Skin continues to remain optimistic about its sales leaders, which is driving customer base expansion. Also, the company expects its solid product pipe line that includes ageLOC Boost device and Nutricentials Bioadaptive Skin Care to boost growth in the second half of 2020. Given an above expected year-to-date performance and the aforementioned upsides, management is raising full year 2020 outlook.
Management now expects 2020 revenues in the range of $2.37-$2.45 billion, including currency headwinds of 2-3%. In 2019, Nu Skin’s revenues amounted to $2.42 billion. Prior to this, the company had anticipated 2020 revenues of $2.17-$2.26 billion.
Further, 2020 earnings are projected in the range of $2.85-$3.10 per share. The company delivered earnings of $3.10 in 2019. Earlier, Nu Skin had envisioned earnings in the range of $2.05-$2.35 per share.
For the third quarter, the company projects revenues in the band of $605-$635 million that includes adverse currency impacts of 1-2%. Earnings are anticipated between 78 cents and 88 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 27.02% due to these changes.
At this time, Nu Skin has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nu Skin has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.