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Herbalife Beat, Guidance Raise Not Enough To Get SunTrust Off The Sidelines

Herbalife Beat, Guidance Raise Not Enough To Get SunTrust Off The Sidelines

SunTrust kept its Neutral rating on Herbalife Ltd. (NYSE: HLF) shares unchanged despite a beat and raise quarter from the nutrition company.

"[W]e remain Neutral on the name given (1) valuation at >14x 2016E EPS (10-16x historical) and (2) the potential for choppiness/hiccups as it implements new distributor processes/regulations post-FTC settlement," analyst Michael Swartz wrote in a note.

Driven by strong volumes, Herbalife reported better-than-expected second-quarter adj. EPS of $1.29 (vs. SunTrust/Street estimates of $1.17/$1.21) on revenue of $1.2 billion, in line with both SunTrust and the Street.

Related Link: Herb Greenberg Isn't Buying Herbalife's Optimism: "They Have A Broken Business Model"

Post-FTC settlement, the company will begin rolling out new tools to distributors in order to enable better tracking of retail consumption/sales. Herbalife expects one-time implementation costs to run $35 million–$50 million with on-going investments of $5 million–$10 million annually.

Herbalife also raised its 2016 outlook including EPS of $4.50–$4.80 from $4.40–$4.75 and volume growth of 4.5–7.5 percent (vs. +2–5 percent). Total revenue growth was maintained at 1.5–4.5 percent due to currency headwinds.

Swartz also increased his 2016/2017 EPS estimates to $4.75 and $5.35, respectively from $4.68 and $5.25.

The analyst maintained his $66 price target, while the stock is currently up 0.54 percent to $67.40.

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Latest Ratings for HLF

Aug 2019UpgradesNeutralBuy
Aug 2019MaintainsBuy
Oct 2018Initiates Coverage OnBuy

View More Analyst Ratings for HLF
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