Icahn Smiles, Ackerman Grimaces as Herbalife Beats Analysts in Q2

Andrew Klips |

Likely to the dismay of hedge fund manager Bill Ackerman, Herbalife Ltd. (HLF) reported record second quarter sales and boosted its full year outlook as the nutrition company notched its 15th consecutive quarter of double digit top-line growth.  Ackerman, who runs Pershing Square Capital Management, has placed a $1-billion short bet on Herbalife, saying that he believes the company is a pyramid scheme.

On the flip side, billionaire investor Carl Icahn took a huge position in Herbalife following Ackerman going public with his order in December, betting that Ackerman will get crushed by a massive short squeeze.  Herbalife has adamantly denied Ackerman’s claims, countering by saying that Ackerman is trying to manipulate the stock price.  Since plunging to December lows of $24.24, shares of HLF are up about 150 percent.

For the quarter, Los Angeles-based Herbalife recorded revenue of $1.22 billion, up 18 percent from $1.03 billion in the same quarter last year.  Net income for the quarter totaled $143.16 million, or $1.34 per share, compared to $131.95 million, or $1.09 per share, in the second quarter of 2013.  Adjusted earnings, which exclude devaluation of Venezuelan currency, costs associated with responding to attacks on the company and other one-time expenses, were $150.7 million, or $1.41 per share, up 29 percent from the $1.09 per share in profits posted in last year’s quarter.

Revenue eked past Wall Street estimates of $1.16 billion, but earnings crushed predictions of $1.18 per share.

The multi-level marketing firm, which makes products like weight loss drinks and nutritional supplements, posted a worldwide gain in volume points of 14 percent compared to the second quarter of 2012. 

Sales in China, the company’s smallest market, swelled by 53 percent to $118.15 million, while the South and Central America region reported 46 percent growth to $222.36 million.  Sales in North America improved 10 percent to $247.56 million.  Revenue from Asia Pacific, the largest sales segment at Herbalife, eked up 1 percent to $299.24 million.

Gross profit contracted a bit from 80.3 percent to 79.7 percent.

“The second quarter record results for volume point and net sales were driven by the ongoing engagement of our distributors and consumer demand for our weight loss and nutrition products worldwide," said Michael O. Johnson, chairman and chief executive at Herbalife.

Herbalife also announced a dividend of 30 cents per share to shareholders of record August 13; payable on August 27.

Looking ahead, the company raised its full-year 2013 earnings per share guidance to between $4.83 and $4.95.  Sales growth is now seen between 16 percent and 18 percent compared to 2012.  Previously, Herbalife forecast EPS between $4.60 and $4.80 and sales expansion between 13 percent and 15 percent.

For the current quarter, Herbalife guided adjusted profits between $1.09 and $1.13 per share and sales growth of 16.5 percent to 18.5 percent.  This outlook was short of analyst expectations of EPS of $1.16, but ahead of sales growth predictions of 13 percent.

Shares of HLF closes the regualr trading day ahead by 3.6 percent at $60.57, but have skipped ahead to a new 52-week high in extended trading with the earnings beat, printing $64.00.

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Companies

Symbol Name Price Change % Volume
HLF Herbalife Ltd. 60.83 -0.34 -0.56 246,388

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