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Herbalife Expects Higher EPS and Lower Sales in 2017

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EPS guidance

Herbalife (HLF) raised its 2Q17 EPS (earnings per share) guidance. The company expects its adjusted 2Q17 EPS to be $0.95–$1.15—compared to its earlier guidance range of $0.85–$1.05. Notably, the company stated that in May, 90% of its sales in the US were documented purchases by end consumers, which is above the 80% guideline imposed by the FTC (Federal Trade Commission).

Herbalife is changing the way it conducts its business in the US following its settlement with the FTC in August 2016. As part of the settlement process, Herbalife agreed to pay $200 million in fines. It also agreed to change the way its accounts for sales.

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Herbalife raised its 2017 adjusted EPS forecast. Now, it projects adjusted EPS to be $4.10–$4.50—up from its earlier guidance range of $4.05–$4.45. Analysts expect the company to post adjusted EPS of $4.61 in 2017—down 5% YoY (year-over-year). In comparison, rival Nu Skin (NUS) is expected to report an 8% rise in its bottom line for 2017. Meanwhile, Usana Health Sciences (USNA) and Vitamin Shoppe (VSI) expect their EPS to fall 1% and 25% in 2017. 

Lower outlook for sales and volumes

Citing challenges related to the FTC transition in the US and soft trends in Mexico, Herbalife lowered its 2Q17 and 2017 sales and volume guidance. Now, it expects sales to fall 2%–6% for 2Q17, while volume points are supposed to fall 4%–8%. Earlier, management anticipated that sales would fall 0.5%–4.5%, while volume points were expected to fall 1%–5%.

In 2017, volume points are expected to fall 1% or rise 2%—down from its earlier guidance of a 2%–5% rise. Meanwhile, the top line is projected to grow 0.5%–3.5%—down from its previous guidance range of a 3%–6% rise. Analysts expect Herbalife to post revenue of $4.6 billion in 2017, which reflects a 2.6% rise.

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