Herbalife Raises 2015 Forecast on Strength of Earnings Beat
May 6, 2015 Leave a comment
Herbalife Ltd. set off a flurry of after-hours trading Tuesday evening as the Los Angeles nutrition company posted first-quarter earnings that easily beat expectations and boosted its profit forecast for the year.
Though revenue fell 12 percent to $1.1 billion, the report topped analysts’ estimates on the strength of higher sales in China. Sales in the market rose 21 percent, offsetting a 34 percent decrease in South and Central America and a 9 percent dip in North America.
Investors responded by driving the stock up 15 percent in after-hours trading to $46.21, its highest level of 2015. The stock had climbed to $48.38 by mid-day today.
In the first three months of 2015, net income rose 4.8 percent to $78.2 million, or 92 cents a share, from $74.6 million, or 74 cents. Adjusted EPS was $1.29, surpassing Herbalife’s own quarterly guidance of $1.00 to $1.10 a share and the Wall Street consensus estimate of $1.00 a share.
Analysts’ forecasts declined in the month leading up to Herbalife’s report, amid renewed accusations from activist investor Bill Ackman that the company employs deceptive marketing practices. Speaking to Bloomberg Television at the start of the week, the hedge fund manager, who has campaigned against Herbalife for two years since shorting the stock $1 billion, said he anticipated poor quarterly results and “continued deterioration of the business.”
Herbalife’s regulatory filing reflected April reports of an ongoing probe by the U.S. Department of Justice. In an earlier statement to CNBC, the supplement seller had acknowledged that it is cooperating in a “federal criminal investigation” into manipulation of Herbalife stock by Ackman.
In Herbalife’s earnings report, Chairman and CEO Michael Johnson pointed to the company’s sales leader retention—up in all markets with EMEA leading the way at 28 percent over a year ago—as a positive indicator of future sales growth.
For the full year, the company expects earnings will be as much as $4.60 a share, excluding some items. Herbalife previously told investors to expect maximum earnings of $4.50 a share.