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Herbalife Crushes 1Q18 Estimates, US Business Returns to Growth

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Performance in 1Q18

Herbalife Nutrition (HLF) reported stronger-than-expected 1Q18 results on May 3. Its 1Q18 sales of $1.2 billion beat analysts’ expectation and marked a ~7% rise YoY (year-over-year). Earlier, Herbalife projected that its 1Q18 sales would grow -1% to 3%, given its tough YoY comparison in China and softness in Mexico and North America.

However, the company’s sales and volumes point to US growth recovering earlier than expected, and its stellar performance in the EMEA (Europe, the Middle East, and Africa) and Asia-Pacific regions drove its top line higher. Also, new product launches have resonated well with consumers and are expected to drive sales in future quarters.

Herbalife’s 1Q18 adjusted EPS (earnings per share) of $1.40 easily surpassed analysts’ expectation of $1.11, rising ~13% YoY. Higher-than-expected sales and lower tax drove the company’s bottom line higher. However, narrower gross margins remained a drag.

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Outlook raised

Following its strong start to 2018 and improving US trends, Herbalife raised its fiscal 2018 outlook. Herbalife has raised its net sales growth guidance to 9%–13% from 5.5%–9.5%. Included in the guidance is a 3.3% boost from currency fluctuations. Herbalife’s worldwide volumes are expected to grow 3%–7%.

In 2Q18, Herbalife expects its top line to grow 8.5%–12.5%, including a 3.7% contribution by currency rates. Besides guiding for higher sales and volumes, Herbalife raised its fiscal 2018 adjusted EPS outlook to $5.05–$5.45 from $4.60–$5. In 2Q18, it expects adjusted EPS of $1.15–$1.35, reflecting higher-than-expected sales, US market improvement, and a lower tax rate and outstanding share count.

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