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Could Lower Volumes, Higher Cost Hurt Herbalife’s 4Q17 Earnings?

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Feb. 16 2018, Published 1:13 p.m. ET

What analysts expect

When Herbalife (HLF) announces its 4Q17 earnings on Thursday, February 22, 2018, Wall Street analysts expect adjusted earnings of $0.96 per share, which represents a YoY (year-over-year) decline of 4%. Lower volumes and increased costs are expected to hurt the company’s bottom-line results.

In comparison, Usana Health Sciences’ (USNA) and Nu Skin Enterprises’ (NUS) 4Q17 EPS (earnings per share) surpassed analysts’ estimate and marked double-digit growth. Analysts expect Vitamin Shoppe (VSI) to report a loss in 4Q17.

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Factors that could impact HLF’s 4Q17 EPS

Herbalife’s 4Q17 EPS could be affected by lower volumes in key regions, including the United States, Mexico, and South and Central America. Adverse currency rates are expected to drive its COGS (cost of goods sold) higher, which could further pressure its profitability. Increased interest costs could also remain a drag.

However, Herbalife’s strategic sourcing, focus on self-manufacturing, and price restructuring efforts could support its bottom-line growth. The anticipated decline in the tax rate and favorable currency rates are expected to cushion its earnings further. The company expects its 4Q17 adjusted EPS to be $0.84–$1.04, which compares with $1 reported in the prior year’s period.

For 2017, Herbalife’s earnings are projected to fall on a YoY basis, reflecting a weak performance in its bottom line in the first three quarters of the year. However, share buybacks and favorable currency rates could support its bottom line.

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