SunTrust: Potential FTC Resolution Should Lift Herbalife Shares Higher

Shares of Herbalife Ltd. HLF surged more than 12 percent as the potential resolution with FTC overshadowed the company's solid quarterly results and upbeat outlook for 2016.

Herbalife reminded investors that, as previously disclosed, the company is in discussions with the FTC regarding its advertising and marketing practices.

"The discussions with the FTC are in the advanced stages, but there are still a number of material open issues that could preclude reaching final agreement," Herbalife said.

Read more: Herbalife's Bullish Trifecta Beat, Raise And FTC Disclosure Making Investors Very Happy

"Solid 1Q results and raised 2016 guidance are likely to take a backseat to the news that HLF is now in 'advanced stages' with respect to settling the ongoing FTC investigation (incl. a $200 million payment)," SunTrust analyst Michael Swartz elaborated.

"While litigation is still a distinct possibility, the appearance of a potential resolution should lift shares higher," Swartz added.

The analyst maintains his Neutral rating, but raised the price target to $66.

Shares of Herbalife rose 12 percent to $65.37 in Friday's afternoon session, but had proceeded slightly lower to $63.91 before the close of regular trading.