Can Herbalife’s 4Q Earnings Stall Breakneck Pace of Its Stock?



Persisting challenges could continue to hurt

Herbalife (HLF) is set to announce its 4Q17 earnings on February 22, 2018. Analysts expect a YoY (year-over-year) decline, reflecting weak volumes and margin headwinds. Persisting challenges in North America, Mexico, and South and Central America are expected to continue to hurt its top-line growth.

Despite the company’s weak financial performance and near-term challenges, its stock continues to rise at a rapid rate, showing growing signs of disconnect with its fundamentals.

Management expects the company’s top and bottom lines to return to growth in 2018 with its North America business seeing improvement in 2Q18. Margin headwinds are expected to subside, which could support its EPS (earnings per share) growth rate.

However, in the near term, tough YoY comparisons in China and the United States and a weakness in Latin America could drag its financials down and stall the stock’s strong run.

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Stock performance

Herbalife stock has risen 23.9% on a YTD (year-to-date) basis as of February 15, 2018, and has significantly outperformed its peers and the benchmark index. The stock seems to be immune to the recent selling pressure from increasing US interest rates.

In the same period, the stocks of Usana Health Sciences (USNA), Nu Skin Enterprises (NUS), and Vitamin Shoppe (VSI) rose 3.8%, 6.7%, and 1.1%, respectively. The S&P 500 Index (SPX-INDEX) rose 2.2% on a YTD basis.


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