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How Did Herbalife Perform in 2Q16?

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Price movement

Herbalife (HLF) fell by 1.4% to close at $67.09 per share during the first week of August 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.4%, 11.6%, and 25.1%, respectively, as of August 5.

HLF is trading 3.3% above its 20-day moving average, 8.8% above its 50-day moving average, and 18.3% above its 200-day moving average.

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Related ETFs and peers

The PowerShares Dynamic Market Portfolio ETF (PWC) invests 0.55% of its holdings in Herbalife. The ETF tracks a quantitative, tier-weighted index covering the entire US equity market. The YTD price movement of PWC was 2.5% on August 5.

The iShares Russell 3000 ETF (IWV) invests 0.02% of its holdings in Herbalife. The ETF tracks a market cap–weighted index that measures the investable US equities market, covering the entire market-cap spectrum, including micro-caps.

The market caps of Herbalife’s competitors are as follows:

  • GNC Holdings (GNC) — $1.4 billion
  • Nu Skin Enterprises (NUS) — $3.3 billion
  • Archer Daniels Midland Company (ADM) — $26.0 billion

Performance of Herbalife in 2Q16

Herbalife reported 2Q16 net sales of $1.20 billion, a rise of 3.4% compared to its net sales of $1.16 billion in 2Q15. Its sales in North America, EMEA (Europe, the Middle East, and Africa), and China rose by 15.9%, 13.0%, and 2.5%, respectively, and its sales in Mexico, South and Central America, and the Asia-Pacific region fell by 7.7%, 10.2%, and 1.9%, respectively, in 2Q16, compared to the prior year’s period.

Its net income and EPS (earnings per share) fell to -$22.9 million and -$0.28, respectively, in 2Q16, compared to $82.8 million and $0.97, respectively, in 2Q15. It reported adjusted EPS of $1.29 in 2Q16, a rise of 4.0% compared to 2Q15.

Herbalife’s cash and cash equivalents rose by 5.3%, and its inventories fell by 2.9% in 2Q16 compared to 4Q15. Its current ratio fell to 1.1x in 2Q16 compared to 1.5x in 4Q15.

Projections

The company has made the following projections for 3Q16 and 2016:

3Q16:

  • volume point growth: 5.0%–8.0%
  • net sales growth: 2.0%–5.0%
  • adjusted EPS: $0.98–$1.08
  • capital expenditure: $35.0 million–$45.0 million
  • currency adjusted net sales growth: 5.5%–8.5%
  • currency adjusted EPS: $1.12–$1.22

The company’s adjusted EPS guidance includes a projected unfavorable impact from currency exchange rates of ~$0.14 per share.

2016

  • volume point growth: 4.5%–7.5%
  • net sales growth: 1.5%–4.5%
  • adjusted EPS: $4.50–$4.80
  • capital expenditure: $160.0 million–$180.0 million
  • effective tax rate: 27.5%–29.5%
  • currency adjusted net sales growth: 7.0%–10.0%
  • currency adjusted EPS: $5.40–$5.70

The adjusted EPS guidance includes a projected currency headwind of ~$0.90 per share.

Now we’ll look at Clorox Company’s performance in its fiscal 4Q16.

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