Shares of Nu Skin Enterprises, Inc. (NUS - Snapshot Report) touched a 52-week high of $65.99 on Oct 3, 2016 and eventually closed at $65.89 after the multi-level marketer settled the Securities and Exchange Commission’s (“SEC”) probe in China. In fact, shares of this skin care and nutritional products retailer have been on an uptrend ever since it reported second-quarter 2016 results on Aug 4.
Factors at Play
On Sep 21, as per Reuters, Nu Skin reached an agreement with the SEC to settle a probe into the company’s charitable contributions in China in 2013. The skincare products maker also raised its guidance for the third quarter of 2016.
Per sources, Nu Skin agreed to pay $765,688 to the SEC after the agency found that the company's books and internal controls related to the donation were insufficient. We note that Nu Skin reportedly stated in Feb 2016 that it would pay $47 million as settlement charges for claims that it operates a pyramid scheme in China, and had made false and misleading statements about its operations.
Like Nu Skin, another multi-level marketer, Herbalife Ltd. (HLF - Snapshot Report) reached a settlement with the Federal Trade Commission (“FTC”), and agreed to pay $200 million as penalty charges. The FTC had charged that Herbalife's earnings potential claims were deceptive and its compensation structure hinged on recruiting other product distributors instead of its selling capability.
Nu Skin now projects third-quarter revenue at the high end of its previously issued guidance range of $560−$580 million, announced during the second-quarter conference call. Earnings in the third quarter are expected in the range of 80–84 cents per share.
While this skin care and nutritional products retailer’s second-quarter 2016 earnings met the Zacks Consensus Estimate, revenues beat the same.
We note that Nu Skin has been performing quite well of late, driven by innovation. In April, the company introduced its ageLOC Youth nutritional product in South Asia Pacific, which drove the region’s revenue growth by 42%, on a constant currency basis.
In the second half of the year, the company intends to focus on the full-time launch of ageLOC Me and its global product initiatives.
Better-than-expected second-quarter results, along with new product launches and a favorable view on currency, also led management to raise its full-year 2016 revenue outlook. It now expects revenues in a range of $2.20−$2.24 billion, including a negative foreign currency impact of 2%−3%. The company had previously projected revenues in a range of $2.16−$2.20 billion, with currency impact of 4%−5%. Adjusted earnings are expected in a band of $2.80−$2.90 per share.
Nu Skin currently sports a Zacks Rank #1 (Strong Buy).
Other well-positioned stocks worth considering in the same industry are Inter Parfums Inc. (IPAR - Snapshot Report) and Coty, Inc. (COTY - Snapshot Report) .
Coty, sporting a Zacks Rank #1, has an average positive earnings surprise of 50.03% in the trailing four quarters with a long-term earnings growth rate of 7.97%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inter Parfums, holding a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 15.00%.
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