What’s behind Herbalife’s Solid Q3 Results?

What drove the company’s top line?

Herbalife (HLF) reported net sales of $1.2 billion during the third quarter of 2018, which came in ahead of analysts’ estimate and jumped 14.5% on a YoY basis. The accelerated pace of new product launches and strong sales across most of the markets drove the company’s top line during the third quarter.

By region, the US continued to witness strong growth. Volume points increased 19% during the reported quarter. Meanwhile, volume points improved 19.6% in China, 24.3% in Asia-Pacific, 17.1% in the EMEA region, and 9.2% in Mexico. However, volume points decreased 8.0% in South and Central America. Herbalife launched 58 products across 51 markets during the third quarter.

What’s behind Herbalife’s Solid Q3 Results?

Bottom line exceeded the estimate

Herbalife reported adjusted earnings of $0.74 per share, which handily surpassed analysts’ expectation of $0.67 and jumped 80.5% on a YoY basis. Higher-than-expected sales growth and strong margins supported the company’s bottom-line growth. The company’s gross margin expanded 230 basis points during the reported quarter, reflecting benefits from self-manufacturing and strategic sourcing coupled with higher pricing. However, the adverse impact from currency fluctuations remained a drag.

Outlook

Herbalife’s top line is projected to benefit from favorable market conditions in the US, China, and India. Meanwhile, new products are further expected to support top-line growth. Plus, higher pricing and margin expansion are expected to support its bottom line. However, adverse currency rates and the slight headwind from tax rates could hurt the EPS growth rate during the fourth quarter.