Canaccord: Currency Headwinds May Cause Problems For Herbalife's Earnings

Canaccord Genuity on Thursday issued a company update on

ahead of the company's earnings announcement on May 5. Canaccord maintained its Buy rating and raised the price target from $42 to $50. Analysts Scott Van Winkle and Mark Sigal wrote, "The Q1 results, particularly how the quarter closed, should provide better clarity to the impacts of a suite of changes to the company's marketing plan. Volume declines in several key markets are fully expected, but the magnitude of such changes as the full implementation of first order limitations (previously limited to about 18 markets) and debut of a new policy mandating qualifying purchases direct from Herbalife will be the key insights. Only the change from the traditional 5K/12-month qualification for sales leaders to 4K should have impacted Q4 when it was introduced in November." Canaccord believes that revenue will decline 15 percent in the first quarter mainly due to currency headwinds. However, positive catalysts for Herbalife going forward include growth in China and Europe, with more modest growth in the United States. While the company current is under regulatory scrutiny, analysts believe investors should receive more clarity from the earnings call. Shares of Herbalife were trading at $45.18, down 3 percent.