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Nu Skin (NUS) Down 5.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Nu Skin Enterprises (NUS - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nu Skin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Nu Skin Tops Q3 Earnings Estimates, Raises 2020 View
Nu Skin reported better-than-expected earnings for third-quarter 2020, while the top line missed the Zacks Consensus Estimate. The company raised its guidance for 2020 and outlined expectations for the fourth quarter. Nu Skin reported quarterly earnings of $1.08 a share, which beat the Zacks Consensus Estimate of 99 cents and improved 37% from 79 cents in the year-ago quarter.
Revenues of $703.3 million advanced 19% year over year, both on a reported and constant-currency basis. The top line missed the Zacks Consensus Estimate of $703.7 million. Third-quarter revenues included a negative impact of less than 1% from foreign currency fluctuations. Revenue growth was primarily aided by increase in sales leaders and customer base.
Sales leaders were up 12% year over year to 68,516, while Nu Skin’s customer base increased 28% to 1,539,511. Growth in both sales leaders and customers was driven by the company’s enhanced socially enabled business model and ongoing investments to become a digitally-focused company. Sales leaders also witnessed strong sequential growth owing to ongoing preparations for new product launches in the fourth quarter, ageLOC Boost device and Nutricentials Bioadaptive Skin Care products.
Further, a shift to work from home and at-home trends have led to increased online shopping, which presents a unique opportunity for the company’s business. With these macro trends, it is making significant investments in the digital platform to build a socially-enabled business. Moreover, its affiliates are increasingly growing their businesses online. Consequently, digital transactions are currently contributing about 90% to Nu Skin’s revenues.
Gross profit of $520 million increased 15.6% from the year-ago figure. However, gross margin contracted 230 basis points (bps) year over year to 73.9%. Nu Skin business’ gross margin also declined 230 bps on a year-over-year basis to 76.3%. The downside was caused by incremental freight costs stemming from higher demand and shipping costs due to the pandemic. Also, a geographic mix shift owing to strong growth in the West region affected gross margin.
Selling expense rose 21% year over year to $280.7 million and deleveraged 60 bps to 39.9%, as a percentage of sales. Nu Skin business selling expense increased 90 bps on a year-over-year basis to 42.4%. The increase in selling expense is mainly attributed to increased qualifiers for incentives in the quarter, thanks to strong revenue growth and a significant rise in sales leaders. Meanwhile, general and administrative expense of $165.1 million increased 11.6% from the year-ago quarter. However, as a percentage of sales, general and administrative expense leveraged 160 bps to 23.5%. Operating income of $74.2 million improved 6.2% year over year. Operating margin was 10.6%, reflecting a decline of 120 bps from the year-ago quarter, mainly owing to soft gross margin and deleverage in selling expense.
Segmental Results & Other Financial Details
Nu Skin’s top-line growth for the third quarter reflected revenue improvement across all regions, except Mainland China. The company delivered strong double-digit revenue improvement in the Americas/Pacific and EMEA regions, with modest growth in most of Asia. Nu Skin noted that the business in Mainland China is stabilizing, as is reflected by sequential growth in revenues, customers and sales leaders in the region. Moreover, it is encouraged by growth in Mainland China and expects the business to return to year-over-year growth in the fourth quarter. Segment-wise, revenues improved 81% in Americas/Pacific, 72% in EMEA, 7% in Southeast Asia, 6% in Japan, 5% in South Korea and 4% in Hong Kong/Taiwan. However, revenues in Mainland China declined 3% from the prior-year level. Consequently, Nu Skin business’ total revenues increased 18% from the prior-year quarter to $662.4 million. Additionally, the company benefited from an impressive 34% revenue growth in the manufacturing division. The Grow Tech business contributed $22 million to revenues.
Nu Skin ended the quarter with cash and cash equivalents of $366.7 million, long-term debt of $312.7 million and stockholders' equity of $827.5 million. Moreover, the company lowered debt by $72.5 million in the third quarter. During the reported quarter, the company paid out dividends of $19.2 million and repurchased $20 million worth of shares. With this, it now has $342.8 million remaining under the current share repurchase authorization. In a separate press release, Nu Skin announced a dividend of 37.5 cents per share payable on Dec 9 to shareholders of record as of Nov 27.
Guidance
The company continues to remain optimistic about momentum in the core Nu Skin business, driven by ageLOC Boost and Nutricentials product introductions in the fourth quarter. Moreover, persistent demand momentum is expected to drive growth in the manufacturing segment. Driven by strong third-quarter performance, momentum in the aforementioned businesses and increased visibility into the future, the company outlined its view for the fourth quarter and raised the guidance for 2020. Further, it expects the momentum to continue in 2021, driven by innovative product launches. For the fourth quarter, the company projects revenues of $720-$750 million that will include favorable currency impacts of 1%. Earnings are anticipated between $1.10 and $1.20 per share.
Management now expects 2020 revenues to be $2.55-$2.58 billion compared with $2.37-$2.45 billion predicted earlier. It now anticipates currency headwinds of 1% on sales versus the prior forecast of 2-3% impact. In 2019, Nu Skin’s revenues amounted to $2.42 billion. Further, 2020 earnings are projected within $3.35-$3.45 per share, indicating an increase from $3.10 delivered in 2019. Earlier, Nu Skin envisioned earnings of $2.85-$3.10 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 13.77% due to these changes.
VGM Scores
Currently, Nu Skin has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nu Skin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Nu Skin (NUS) Down 5.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Nu Skin Enterprises (NUS - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nu Skin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Nu Skin Tops Q3 Earnings Estimates, Raises 2020 View
Nu Skin reported better-than-expected earnings for third-quarter 2020, while the top line missed the Zacks Consensus Estimate. The company raised its guidance for 2020 and outlined expectations for the fourth quarter. Nu Skin reported quarterly earnings of $1.08 a share, which beat the Zacks Consensus Estimate of 99 cents and improved 37% from 79 cents in the year-ago quarter.
Revenues of $703.3 million advanced 19% year over year, both on a reported and constant-currency basis. The top line missed the Zacks Consensus Estimate of $703.7 million. Third-quarter revenues included a negative impact of less than 1% from foreign currency fluctuations. Revenue growth was primarily aided by increase in sales leaders and customer base.
Sales leaders were up 12% year over year to 68,516, while Nu Skin’s customer base increased 28% to 1,539,511. Growth in both sales leaders and customers was driven by the company’s enhanced socially enabled business model and ongoing investments to become a digitally-focused company. Sales leaders also witnessed strong sequential growth owing to ongoing preparations for new product launches in the fourth quarter, ageLOC Boost device and Nutricentials Bioadaptive Skin Care products.
Further, a shift to work from home and at-home trends have led to increased online shopping, which presents a unique opportunity for the company’s business. With these macro trends, it is making significant investments in the digital platform to build a socially-enabled business. Moreover, its affiliates are increasingly growing their businesses online. Consequently, digital transactions are currently contributing about 90% to Nu Skin’s revenues.
Gross profit of $520 million increased 15.6% from the year-ago figure. However, gross margin contracted 230 basis points (bps) year over year to 73.9%. Nu Skin business’ gross margin also declined 230 bps on a year-over-year basis to 76.3%. The downside was caused by incremental freight costs stemming from higher demand and shipping costs due to the pandemic. Also, a geographic mix shift owing to strong growth in the West region affected gross margin.
Selling expense rose 21% year over year to $280.7 million and deleveraged 60 bps to 39.9%, as a percentage of sales. Nu Skin business selling expense increased 90 bps on a year-over-year basis to 42.4%. The increase in selling expense is mainly attributed to increased qualifiers for incentives in the quarter, thanks to strong revenue growth and a significant rise in sales leaders. Meanwhile, general and administrative expense of $165.1 million increased 11.6% from the year-ago quarter. However, as a percentage of sales, general and administrative expense leveraged 160 bps to 23.5%. Operating income of $74.2 million improved 6.2% year over year. Operating margin was 10.6%, reflecting a decline of 120 bps from the year-ago quarter, mainly owing to soft gross margin and deleverage in selling expense.
Segmental Results & Other Financial Details
Nu Skin’s top-line growth for the third quarter reflected revenue improvement across all regions, except Mainland China. The company delivered strong double-digit revenue improvement in the Americas/Pacific and EMEA regions, with modest growth in most of Asia. Nu Skin noted that the business in Mainland China is stabilizing, as is reflected by sequential growth in revenues, customers and sales leaders in the region. Moreover, it is encouraged by growth in Mainland China and expects the business to return to year-over-year growth in the fourth quarter. Segment-wise, revenues improved 81% in Americas/Pacific, 72% in EMEA, 7% in Southeast Asia, 6% in Japan, 5% in South Korea and 4% in Hong Kong/Taiwan. However, revenues in Mainland China declined 3% from the prior-year level. Consequently, Nu Skin business’ total revenues increased 18% from the prior-year quarter to $662.4 million. Additionally, the company benefited from an impressive 34% revenue growth in the manufacturing division. The Grow Tech business contributed $22 million to revenues.
Nu Skin ended the quarter with cash and cash equivalents of $366.7 million, long-term debt of $312.7 million and stockholders' equity of $827.5 million. Moreover, the company lowered debt by $72.5 million in the third quarter. During the reported quarter, the company paid out dividends of $19.2 million and repurchased $20 million worth of shares. With this, it now has $342.8 million remaining under the current share repurchase authorization. In a separate press release, Nu Skin announced a dividend of 37.5 cents per share payable on Dec 9 to shareholders of record as of Nov 27.
Guidance
The company continues to remain optimistic about momentum in the core Nu Skin business, driven by ageLOC Boost and Nutricentials product introductions in the fourth quarter. Moreover, persistent demand momentum is expected to drive growth in the manufacturing segment. Driven by strong third-quarter performance, momentum in the aforementioned businesses and increased visibility into the future, the company outlined its view for the fourth quarter and raised the guidance for 2020. Further, it expects the momentum to continue in 2021, driven by innovative product launches. For the fourth quarter, the company projects revenues of $720-$750 million that will include favorable currency impacts of 1%. Earnings are anticipated between $1.10 and $1.20 per share.
Management now expects 2020 revenues to be $2.55-$2.58 billion compared with $2.37-$2.45 billion predicted earlier. It now anticipates currency headwinds of 1% on sales versus the prior forecast of 2-3% impact. In 2019, Nu Skin’s revenues amounted to $2.42 billion. Further, 2020 earnings are projected within $3.35-$3.45 per share, indicating an increase from $3.10 delivered in 2019. Earlier, Nu Skin envisioned earnings of $2.85-$3.10 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 13.77% due to these changes.
VGM Scores
Currently, Nu Skin has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nu Skin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.