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Nu Skin (NUS) Q2 Earnings & Sales Rise Y/Y, '18 View Lifted

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Nu Skin Enterprises (NUS - Free Report) posted second-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate. Both the top and the bottom line improved year over year, buoyed by sturdy performances in most regional segments. The quarter also witnessed sustained growth in customers and sales leaders. Such a stellar quarterly show encouraged management to raise 2018 revenue and earnings projections.

Also, Nu Skin’s shares have rallied 12.9% in the past six months, against the industry’s 1.4% decline. This is mainly attributable to the company’s solid strategies to boost sales networks and products.

Q2 Highlights

The company posted adjusted earnings of $1.08 per share in the quarter, which surged almost 40% from a year ago. The Zacks Consensus Estimate for earnings for the quarter was 90 cents per share.


 

Nu Skin’s revenues of $704.2 million beat the Zacks Consensus Estimate of $641.4 million and surged almost 28% from the prior-year quarter. The top line was supported by a 24% rise in core Nu Skin revenues, including a 4% positive benefit from foreign currency.

The quarter also gained from 21% growth in sales leaders to 71,300. This was preceded by a rise of 16% and 33% during the first quarter of 2018 and the fourth quarter of 2017, respectively.  Also, Nu Skin’s customer base in the quarter increased 8% to a total strength of 1,148,000. This was preceded by a rise of 7% in the first quarter of 2018 and a respective 8%, 7%, 5% and 2% during the fourth, third, second and first quarters of 2017.  

Apart from these, the quarter witnessed solid gains from acquired businesses and healthy performance in the Mainland China, Americas/Pacific and Southeast Asia regions.

Moving on to gross profit, the company saw a 25% rise to $535.6 million. However, gross margin declined 180 basis points (bps) to 76.1%.

Further, operating income improved 28% to $82.8 million, while operating margin came in at 11.8%, flat year over year.

Nu Skin Enterprises, Inc. Price, Consensus and EPS Surprise

Regional Results

Region-wise, revenues surged across all regions in the reported quarter except Japan. The highest growth was witnessed in Mainland China, Southeast Asia and Americas/Pacific wherein revenues improved 43%, 31% and 25% from the prior-year quarter to a respective $245.3 million, $79.2 million and $104 million. Further, revenues increased 9% to $91.6 million in South Korea, 15% to $44 million in EMEA and 21% to $52.2 million in Hong Kong/Taiwan. However, Japan saw a 1% revenue decline to $64.1 million.

Other Financial Details

Nu Skin ended the quarter with cash and cash equivalents of $402 million and total liabilities and stockholders' equity of $1,746.4 million.

During the quarter, the company repurchased shares worth $18.4 million with an outstanding new authorization of $500 million.

Additionally, the company paid $20.3 million as dividends in the quarter. Concurrent to the earnings release, management declared a quarterly dividend of 36.5 cents payable on Sep 12, 2018, to shareholders of record as on Aug 31, 2018.

Guidance

Management is impressed with the continued growth in the sales leaders and customer count. Moreover, most regions of the company have been going strong.

Incidentally, the solid performance in the first and second quarters of 2018 impelled the company to raise its view for the year. Management now expects revenues for 2018 in the range of $2.63-$2.67 billion, compared with the prior view of $2.51-$2.56 billion. The raised top-line view depicts 15-17% growth from the prior year and also includes a 1% benefit from favorable currency rates. Additionally, earnings per share for 2018 are now projected in the band of $3.50 to $3.65 as compared to the previous view of $3.45-$3.65. Bottom-line estimates include negative impacts of 16 cents and 13 cents stemming from purchase accounting and currency translations, respectively.

Further, for third-quarter 2018, management anticipates revenues in the range of $650-$670 million, including a 3% positive currency impact. Further, management expects earnings for the third quarter in the band of 93-98 cents per share, including charges of 4 cents stemming from purchase accounting.

Nu Skin is also focused on boosting customers and sales leaders through improved social sharing, innovation and capability improvements through acquisitions. Management is also on track with the rollout of a sales compensation program — Velocity.  

Nu Skin currently carries a Zacks Rank #4 (Sell), which might change following the robust second-quarter quarterly release. Until then, investors can bet on better-ranked stocks in the consumer staples space.

Looking for Consumer Staple Stocks? Check These

Helen of Troy Limited (HELE - Free Report) , carrying a Zacks Rank #2 (Buy), has an impressive earnings surprise history and a long-term earnings growth rate of 6.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Chefs' Warehouse, Inc. (CHEF - Free Report) , with long-term earnings per share growth rate of 22%, also carries a Zacks Rank #2.

Service Corporation International (SCI - Free Report) , also a Zacks Rank #2 company, delivered an average positive earnings surprise of 13.1% in the trailing four quarters.

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