A month has gone by since the last earnings report for Nu Skin Enterprises (NUS - Free Report) . Shares have added about 1.5% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Nu Skin’s Q3 Earnings Miss Estimates, Sales Rise Y/Y
Nu Skin’s third-quarter 2018 earnings missed the Zacks Consensus Estimate. Meanwhile, revenues surpassed the consensus mark. In fact, both the top and the bottom line improved year over year buoyed by solid performances in most regional segments. The quarter also witnessed sustained growth in customers and sales leaders. However, the quarter witnessed negative currency impacts and weak gross margins. In fact, adverse currency fluctuations are expected to continue in 2018.
The company posted adjusted earnings of 94 cents per share in the quarter, up almost 24% from the year-ago tally. This includes foreign currency translation loss of 7 cents and acquisition accounting expenses of 4 cents. Excluding foreign currency translation loss, the bottom line depicts growth of 33%. The Zacks Consensus Estimate for the quarter’s earnings was 96 cents per share.
Nu Skin’s revenues of $675.3 million beat the Zacks Consensus Estimate of $663.7 million and rose almost 20% from the prior-year quarter. The top line was supported by an 18% rise in core Nu Skin revenues, on a constant currency (cc) basis. The company’s recent buyouts contributed 5% to top-line growth. However, revenues include a 3% negative impact from foreign currency changes.
The quarter continued to depict steady rise in sales leaders and customers, buoyed by successful growth strategies. Sales leaders grew 14% to 73,100. This was preceded by a rise of 21% and 16% in the second and first quarters, respectively.
Also, Nu Skin’s customer base in the reported quarter increased 9% to a total strength of 1,166,000. This followed a respective rise of 8% and 7% in the second and first quarter of 2018.
Moving on to gross profit, the company saw a 17% rise to $517.9 million. Gross margin declined 190 basis points (bps) to 76.7%. Nevertheless, core Nu Skin gross margin improved 10 bps to 78.7%
Further, operating income improved 25.3% to $80.7 million, while operating margin came in at 11.9%, compared with 11.4% in the prior-year quarter.
Region-wise, revenues surged across all regions in the reported quarter. The highest growth was witnessed in Mainland China and Southeast Asia wherein revenues improved 31% and 21% from the prior-year quarter to a respective $226.6 million and $86.3 million. Further, revenues increased 9% to $93.6 million in Americas/Pacific, 1% to $70 million in South Korea, 7% to $42.8 million in EMEA, 9% to $45 million in Hong Kong/Taiwan and 2% to $63.6 million in Japan.
Other Financial Details
Nu Skin ended the quarter with cash and cash equivalents of $390 million and total liabilities and stockholders' equity of $1,746.2 million.
During the quarter, the company repurchased shares worth $12.4 million with an outstanding authorization of $492 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 Dec 12, 2018, to shareholders of record as on Nov 30, 2018.
Management is impressed with continued growth in the sales leaders and customer count. Moreover, most regions of the company have been going strong. The solid performance in quarter impelled the company to raise its revenue projections for the year. Management now expects revenues for 2018 in the range of $2.66-$2.68 billion, compared with the prior view of $2.63-$2.67 billion. The raised top-line view depicts 17-18% growth from the prior year, including neutral currency impact.
Additionally, earnings per share for 2018 are now projected in the band of $3.48 to $3.55, as compared to the previous view of $3.50 to $3.65. Bottom-line estimates include negative impacts of 20 cents and 16 cents stemming from currency translations and purchase accounting, respectively.
For fourth-quarter 2018, management anticipates revenues in the range of $665-$685 million, including a 4-5% negative currency impact. Further, management expects earnings per share for the fourth quarter in the band of $1.00 to $1.07, including charges of 4 cents stemming from purchase accounting.
Nu Skin is also focused on boosting customers and sales leader count through improved social sharing, innovation and capability improvements through acquisitions. Management is also on track with the rollout of a sales compensation program — Velocity.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Nu Skin has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Nu Skin has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.