Herbalife Profit Down, But Lifts FY Outlook; Boosts Share Buyback

(RTTNews) - Herbalife Ltd. (HLF) on Monday reported a drop in profit for the first quarter, as strong growth in North America, China and EMEA was offset by Venezuela foreign exchange loss.

Nonetheless, the nutrition supplements company lifted its full-year 2014 outlook, and also terminated its quarterly dividend to utilize the cash for additional stock buyback.

Los Angeles, California-based Herbalife's profit dropped to $74.6 million or $0.74 per share from $118.9 million or $1.10 per share a year ago. Adjusted earnings improved to $1.50 per share from $1.27 per share last year. Analysts polled by Thomson Reuters estimated earnings of $1.29 per share. Analysts' estimates typically exclude one-time items.

Sales for the first quarter grew 12 percent to $1.26 billion from $1.12 billion a year ago. Analysts estimated sales of $1.23 billion for the quarter.

Herbalife's third-quarter volume growth was 9 percent, driven largely by a 9 percent growth in the North American, 25 percent in EMEA and a 91 percent growth in China.

Chief Executive Michael Johnson said, "Our performance reflects the demand for our exceptional products."

Selling, general and administrative costs rose to $502.1 million from $364.7 million last year, including an $89.3 million Venezuela foreign exchange loss.

Looking forward to the full year 2014, the company now expect adjusted earnings of $6.10 to $6.30 per share and sales growth of 10 to 12 percent. Analysts currently see earnings of $6.05 per share on revenue growth of 9.90 percent for 2014.

Previously, the company expected adjusted earnings of $5.85 to $6.05 per share on sales growth of 7.5 to 9.5 percent.

Johnson said, "This reflects our confidence that Herbalife is well-positioned to continue to grow and play an increasingly important role in improving nutrition and reducing obesity around the world."

For the second quarter, the company has forecast adjusted earnings of $1.51 to $1.55 per share and sales growth of 10 to 12 percent. Analysts currently expect earnings of $1.55 per share on revenue growth of 9.10 percent.

The company suspended its quarterly cash dividend and instead will use the $216 million to buy back more of its stock than earlier planned. The company now expects to buyback a total of $581 million of stock during the second quarter of 2014.

Herbalife is a multi-level marketing company that sells nutritional supplements, energy, sports and fitness products. It has been at the center of attention for investors ever since William Ackman, the activist manager of hedge fund Pershing Square, called it a pyramid scheme that would fail soon.

Nonetheless, the company found support with billionaire activist investor Carl Icahn who became a major shareholder of Herbalife. Icahn said that Herbalife has a legitimate business model. However, early this year, Herbalife's stock took a beating after Senator Ed Markey called for a probe into the allegations.

Meanwhile, Carl Icahn, following today's announcement, tweeted on his Twitter account "Great move by #HLF to suspend dividend & buyback shares. $HLF accelerates return to shareholders. Confirms confidence in the future."

HLF closed Thursday's trading at $58.85, up $1.02 or 1.76%, on the NYSE. The stock, further gained $0.15 or 0.25% in after-hours trade.