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Herbalife Sees a Rise in Carl Icahn’s Stake

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Nov. 10 2016, Updated 8:04 a.m. ET

Price movement

Herbalife (HLF) has a market cap of $5.1 billion. It fell 2.0% to close at $54.96 per share on November 4, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -8.7%, -13.3%, and 2.5%, respectively, on the same day.

HLF is trading 9.8% below its 20-day moving average, 10.5% below its 50-day moving average, and 7.2% below 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 quant-selected, tier-weighted index covering the entire US equity market. The YTD price movement of PWC was 0.35% on November 4.

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

  • GNC Holdings (GNC) — $959.8 million
  • Nu Skin Enterprises (NUS) — $3.0 billion
  • Archer Daniels Midland (ADM) — $26.8 billion

Latest news on Herbalife

In a press release, Reuters reported, “Activist investor Carl Icahn has raised his stake in Herbalife Ltd. (HLF) to 23.1 percent as of Nov. 3, according to a regulatory filing on Thursday.”

The release continued, “Herbalife said on Tuesday that Chief Executive Michael Johnson would step down next year and be replaced by Chief Operating Officer Richard Goudis, a choice Icahn said he fully supported.”

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Herbalife’s performance in 3Q16

Herbalife (HLF) reported 3Q16 net sales of $1.12 billion, a rise of 1.8% over the net sales of $1.10 billion in 3Q15. Between 3Q15 and 3Q16, sales from the North America, EMEA (Europe, the Middle East, and Africa), and Asia-Pacific regions rose 9.9%, 10.5%, and 3.0%, respectively.

Sales from Mexico, South and Central America, and China fell 0.53%, 12.4%, and 4.8%, respectively, between 3Q15 and 3Q16. The company’s gross margin rose 20 basis points, and its operating margin fell 120 basis points.

Herbalife’s net income and EPS (earnings per share) fell to $87.7 million and $1.01, respectively, in 3Q16, compared with $93.6 million and $1.09 in 3Q15. It reported adjusted EPS of $1.21 in 3Q16, a fall of 4.0% from 3Q15.

Herbalife’s cash and cash equivalents fell 11.4%, and its inventories rose 12.0% between 4Q15 and 3Q16. Its current ratio fell to 1.2x in 3Q16, compared with 1.5x in 4Q15.

Projections

Herbalife (HLF) made the following projections for fiscal 4Q16:

  • net sales growth of -2.5% to 1.5%
  • adjusted EPS of $0.80–$1.00
  • capital expenditure of $33.0 million–$43.0 million

The company made the following projections for fiscal 2016:

  • volume point growth of 4.5%–5.5%
  • net sales growth of 1.0%–2.0%
  • adjusted EPS of $4.65–$4.85
  • capital expenditure of $145.0 million–$155.0 million
  • effective tax rate of 28.0%–30.0%
  • currency-adjusted net sales growth of 6.3%–7.3%
  • currency-adjusted EPS of $5.61–$5.81

The company made the following projections for fiscal 2017:

  • net sales growth of 3.5%–6.5%
  • adjusted EPS of $4.60–$5.00
  • capital expenditure of $130.0 million–$160.0 million

Next, we’ll discuss Snyder’s-Lance (LNCE).

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