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How Did Herbalife Perform in 3Q16?

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Price movement

Herbalife (HLF) has a market cap of $5.5 billion. It fell 2.6% to close at $59.12 per share on November 1, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.4%, -7.4%, and 10.3%, respectively, on the same day. HLF is trading 4.4% below its 20-day moving average, 4.3% below its 50-day moving average, and 0.11% 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 quant-selected, tier-weighted index covering the entire US equity market. The YTD price movement of PWC was 1.1% on November 1. The market caps of Herbalife’s competitors are as follows:

  • GNC Holdings (GNC) — $969.2 million
  • Nu Skin Enterprises (NUS) — $3.4 billion
  • Archer Daniels Midland (ADM) — $26.7 billion

Performance of Herbalife in 3Q16

Herbalife reported 3Q16 net sales of $1.12 billion, a rise of 1.8% over the net sales of $1.10 billion in 3Q15. 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, and 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.

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Its 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 has made the following projections for fiscal 4Q16:

  • net sales growth of -2.5%–1.5%
  • adjusted EPS of $0.80–$1
  • capital expenditure of $33.0 million–$43.0 million

The company has 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 has 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 Coach (COH).

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