Herbalife Beats, but Investigations Loom - Analyst Blog

Herbalife Beats, but Investigations Loom

Herbalife Ltd HLF, reported earnings after the bell today, posting an EPS of $1.50, and Revenues at $1.26 billion.  These numbers beat both the Zacks Consensus Earnings Estimate of $1.29, and Zacks Consensus Revenue Estimate of $1.234 billion.  

The major cloud hanging over Herbalife has been the accusations by Mr. Ackman, stating that the company is essentially a giant pyramid scheme.  As of a few days ago, the FBI, DOJ, SEC, FTC, and two attorney generals are investigating Herbalife for an array of issues.  Moreover, a recent ABC undercover investigation showed distributors claiming that Herbalife products can cure brain tumors, and a woman claiming that Herbalife helped her get pregnant. Since the investigation was announced on March 12, the company's stock price has dropped about 37%.  None of this is good news for the company going forward.

On the positive side, HLF has increased their 2014 guidance to a range between $6.10 and $6.30, significantly above the current Zacks Consensus Estimate of $6.04.  Moreover, management increased guidance on net sales for 2014, rising from 10% to between 10% and 12%.  Both are very encouraging for investors.

With this quarter's earnings beat, it makes four out of five consecutive quarters with positive earnings growth. But this might all be for not, if the company is found guilty, then all these great growth numbers are basically pointless.  

In afterhours trading, Herbalife has been both in the positive and negative ranges.  As of 3:45 cst, it is up just over 2.0% on elevated volume.  Tomorrow morning Zacks will post a fully detailed earnings report.