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Could Herbalife Stock Fall on Its 1Q17 Results?



YTD performance

Herbalife (HLF), a global nutrition and weight management company, has witnessed a strong run in 2017. Year-to-date through April 27, 2017, HLF stock has risen ~30.7%, thanks to Carl Icahn’s continued investment in the company.

The chart below shows that year-to-date (or YTD), Herbalife stock has outperformed the S&P 500 Index (SPX) and its key peers. On April 27, 2017, Nu Skin Enterprises (NUS) and Usana Health Sciences (USNA) have generated returns of 15.3% and -7.7%, respectively.

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What could restrict the uptrend?

Herbalife (HLF) is witnessing sluggish sales and volume trends in most of its markets, which could put pressure on the company’s financials in the next few quarters. These factors include adverse currency movements, macroeconomic challenges in Brazil and Korea, challenges in South American and Central America, declining sales in China, and tepid growth in North America.

Given the near-term challenges, analysts expect the company to report a decline in its top-line and bottom-line results for 1Q17. Despite these challenges, the company remains upbeat and expects to return to growth in China (FXI), which could boost the company’s overall sales growth.

The company’s management expects that its continued investment in marketing and the demand for nutritional products could accelerate its sales growth. However, given the near-term challenges, Herbalife stock seems to have limited upside potential.

Series overview

Herbalife (HLF) is slated to announce its 1Q17 results on May 4, 2017. In this series, we’ll discuss the expectations for the company’s sales and earnings. We’ll also discuss its valuation and analyst recommendations for its stock.

In the next part of this series, we’ll discuss the company’s earnings trends.


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