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What Drove Herbalife’s Q2 2018 Sales and Earnings?

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Sales and earnings exceed consensus

Herbalife (HLF) reported net sales of $1.3 billion, surpassing analysts’ estimate and rising 12.0% YoY (year-over-year). The company’s healthy second-quarter sales growth was led by its exceptional performance in China and the United States. Its top line in North America rose 20.2% led by 18.4% growth in volume points.

China rebounded strongly, with volume points increasing by 27.4%. Meanwhile, the EMEA (Europe, the Middle East, and Africa) and Asia-Pacific regions recorded volume point improvements of 12.75% and 9.7%, respectively. Mexico returned to a growth trajectory and marked a 3.6% rise in volume points.

Herbalife’s adjusted EPS rose 5.3% YoY to $0.80, exceeding analysts’ expectation of $0.67. Strong sales and a lower adjusted effective tax rate supported the company’s bottom line growth. However, higher manufacturing costs remained a drag.

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Outlook

Herbalife’s management lifted its full-year volume point guidance thanks to its encouraging performance in the first half of the year. The company now expects its worldwide volume points to increase 6.0%–9.0% in 2018, up from its earlier guidance of 3.0%–7.0% growth. Its net sales are expected to mark 8.3%–12.3% growth in 2018, down from its previous guidance of 9.0%–13.0% growth owing to adverse currency rates. Its adjusted EPS are projected to be in the range of $2.60–$2.80 in 2018, with currency rates anticipated to have an adverse impact of $0.13.

As for the third quarter, Herbalife’s volume points are expected to mark an increase of 8.5%–12.5%. Meanwhile, its net sales are expected to grow by 9.0%–14.0%. Its adjusted EPS are likely to be in the range of $0.58–$0.68.

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