A month has gone by since the last earnings report for Nu Skin Enterprises (NUS - Free Report) . Shares have lost about 4.4% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Nu Skin's Q3 Earnings Beat Estimates, Revenues Miss
Nu Skin released third-quarter 2019 results. Quarterly earnings of 79 cents a share beat the Zacks Consensus Estimate of 76 cents. However, the bottom line tumbled almost 16% from the year-ago quarter’s reported figure.
Revenues of $589.9 million missed the Zacks Consensus Estimate of $631 million and declined 12.6% from the prior-year quarter’s level. The metric includes a negative impact of 2% (or approximately $12 million) from foreign currency fluctuations. Revenues in the quarter were hurt by a tough regulatory environment in Mainland China, primarily due to meeting restrictions.
Sales leaders were 61,090, down 16% year over year, with Mainland China accounting for the majority of the decline. In fact, sales leaders deteriorated in all regions. Nevertheless, Nu Skin’s customer base expanded 4% to 1,206,697, primarily on growth in Mainland China along with improvement in the EMEA region.
Gross profit came in at $449.8 million, down 13.1% from the year-ago quarter’s figure. Gross margin contracted 50 basis points (bps) to 76.2%, owing to a higher percentage of manufacturing revenues. Nu Skin’s base business gross margin contracted 10 bps to 78.6%.
Selling expenses amounted to $231.9 million, which accounted for 39.3% of revenues compared with 40.2% in the year-ago quarter. Meanwhile, general and administrative expenses of $147.9 million accounted for 25.1% of revenues, up from 24.5% in the year-ago quarter
Operating income declined 13.4% to $69.9 million, primarily due to lower revenues. Operating margin shrank 10 bps to 11.8%.
Revenues declined across most regions, except Japan wherein sales improved 6% from the prior-year quarter’s level. The highest drop was witnessed in Mainland China, where the metric declined 23%. Further, revenues fell 11% in the Americas/Pacific, 12% in South Korea, 9% in Southeast Asia, 10% in Hong Kong/Taiwan and 17% in EMEA.
Other Financial Details
Nu Skin ended the quarter with cash and cash equivalents of $320 million, long-term debt of $341.7 million and stockholders' equity of $845.8 million.
In a separate press release, Nu Skin announced a quarterly dividend of 37 cents per share, payable on Dec 11, 2019, to shareholders of record as of Nov 29.
Nu Skin focuses on product launches and anticipates introducing various products to the market in 2020. These include a reformulated Tru Face Essence Ultra as well as new Galvanic gels. Also, the company unveiled its plans to launch a daily-use beauty device, which is expected to be a robust business driver in the second half of 2020.
Nu Skin is making efforts to improve its business in Mainland China. In fact, the company is seeing sequential stability in sales leaders and overall business in the region. However, management believes that a complete revival in sales leader numbers may take a few quarters.
Management expects 2019 revenues of $2.41-$2.43 billion, including currency headwinds of nearly 4%. Further, earnings are projected in the range of $3.07-$3.14 per share, indicating a decline from $3.52 delivered in the prior year.
For the fourth quarter, the company projects revenues of $570-$590 million, including adverse currency impacts of nearly 2%. Earnings are anticipated between 68 cents and 75 cents per share, including costs related to the LIVE event hosted in October. In the year-ago period, Nu Skin’s adjusted earnings came in at $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -18.49% due to these changes.
At this time, Nu Skin has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.