Herbalife Limited (HLF)
It’s
hard to deny that we are
becoming a much more informed society in general. The
internet alone has broadened the knowledge
(and curiosity) of millions of people around the world.
Fitness,
medicine and wellness in
general are hot topics on the web. Many
folks visit sites like WebMD, Diagnosispro.com and others to diagnose
their
ailments or perhaps just improve their way of life.
While
it may not be possible (or
smart) to diagnose a major illness without the help of a physician;
some people
find that adding a supplement or two can help address minor conditions
or deficiencies. Here in the States, it’s becoming more and
more common to complement your diet with vitamins or other supplements.
In
fact, 69 percent of U.S. adults
take dietary supplements according to a survey commissioned by the
Council for
Responsible Nutrition (CRN), which is the dietary supplement industry’s
leading
trade association.
The
survey also shows an upward
trend in dietary supplement consumption.
Consumer usage is up from 66 percent in 2010, 65 percent in 2009, and
64
percent in 2008. Our fast moving society and demand
for quick, cheap, nutritional meals is also boosting the “meal
replacement
market.” Shakes, protein bars and other
high calorie, vitamin balance snacks are growing fast as well.
Herbalife supplies these nutritional
supplements, personal care and meal replacement options to customers
around the
world. According to Herbalife’s reports,
volume and profits are on the rise.
Analysts are also putting HLF on their strong buy list as the company
is
showing good earnings momentum in a sector that is heating
up.
Company
Description & Earnings
Developments
Herbalife Limited is a network marketing company that sells weight
management,
nutritional supplement, energy, sports and fitness, and personal care
products in
over 75 different states.
In his notes on January 3rd,
Todd Bunton noted that Herbalife delivered record results for Q32011.
Earnings
per share came in at 87 cents, beating the Zacks Consensus Estimate of
76 cents;
a 45% increase over the same quarter in 2010. Net sales
soared 30% to $895
million and established markets saw volume growth of 20% in the third
quarter,
while the emerging markets experienced 27% volume growth.
In their Q4 on February 23rd,
HLF again beat estimates, with earnings coming in at $0.86 for the
quarter. Revenue increased to $884.6 for the quarter,
which was 20% higher than the same quarter one year prior.
HLF is a mid-cap
(8.23 billion) company that is trading at about 19.5 times forward
(expectations for next quarter) earnings. The health and
wellness company moved back up to a Zacks Rank 1
strong buy on March 10th, 2011.
HLF
earnings increased from $2.34 in
FY2010 to $3.30 in FY2011 (diluted) and they expected to earn $3.64 in
FY2012
according to the Zacks Consensus Estimate.
Moving Forward
Herbalife has surprised analysts to
the upside 4 quarters in a row at an average of almost 16.50%.
Of
the 11 analysts who cover HLF,
the consensus is for the company to grow earnings by 10% in the current
year (FY2012)
and roughly 13% in FY2013.
In terms of the magnitude of
analyst estimate trends, we are seeing all of the consensus estimates
higher
than they were 90 days ago for the current and next quarter as well as
FY2012 and
FY2013.
Next quarter’s average analyst
estimate for revenue is $875.1 million, with a Zacks Consensus EPS
estimate of
$0.81.
Market Performance &
Technicals
HLF is currently in a bullish trend making higher highs and higher
lows. Look for initial support to come at the $65
level. Below that the 50 and 200 day
moving averages of $61.16 and $56.95 will be key.
HLF
has exceeded the S&P 500’s
performance in the past year by a whopping 67% and outpaced it by over
23% in
the past 3 months alone! The stock
remains in a bullish trend and has maintained its momentum in the past
month, leading
the index by about 14%. Performance tends to be correlated
to the markets but with a higher volatility factor.
Jared
A Levy is the Momentum Stock
Strategist for Zacks.com. He is also the Editor in charge of the
market-beating
Zacks
Whisper Trader Service.
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