Nu Skin Enterprises Inc.
(
NUS
) is a Zacks #1 Rank (Strong Buy) that recently raised its earnings
guidance for 2012 and pays a dividend that yields a healthy 2.1%.
Earnings estimates for this provider of anti-aging personal care
products have moved upward since announcing impressive
second-quarter 2012 results, which included a positive earnings
surprise of 13.3%. Catalysts driving the growth include product
innovation, emerging markets, the strong balance sheet and cash
flow generation capability.
Profit Surges, Guidance Up
On July 26, Nu Skin Enterprises reported second-quarter 2012
earnings of 94 cents per share, topping the Zacks Consensus
Estimate of 83 cents and jumping nearly 45% from last year's 65
cents. Notably, the company outperformed the Zacks Consensus
Estimates in 10 of the past 11 quarters and missed just once.
Total sales of $593.2 million comfortably surpassed the Zacks
Consensus Estimate of $510 million and surged 39.8% from $424.4
million a year ago. The launch of ageLOC anti-aging products
facilitated top-line growth. Region wise, sales surged across
Greater China (up 152%), South Asia/Pacific (up 66%), the Americas
(up 20%) and Europe (up 7%). However, these were partially
mitigated by a 3% sales decline in North Asia.
Gross profit jumped 40.9% to $497.7 million, while gross margin
expanded 70 basis points to 83.9%. Operating income rose 48.2% to
$97.9 million, whereas operating margin improved 90 basis points to
16.5%.
Buoyed by better-than-expected results, management raised its 2012
earnings guidance to between $3.16 and $3.24 per share on projected
sales of $2.00 billion to $2.03 billion. Earlier, the company had
forecasted earnings between $2.92 and $3.00 per share, and sales of
$1.845 billion to $1.875 billion.
Earnings Estimates Climbing
This Zacks #1 Rank (Strong Buy) stock has been witnessing upward
estimate revisions over the past 60 days. The Zacks Consensus
Estimates for 2012 and 2013 increased 5.9% and 5.2% to $3.24 and
$3.64, respectively. The 2012 estimate implies year-over-year
growth of 12.6%, whereas the 2013 estimate reflects an increase of
12.4% over the prior-year.
Dividend Portraying Strength
Nu Skin Enterprises has been consistently raising its dividend
since initiating the payment in 2001. In February 2012, the company
hiked its quarterly dividend by 25% to 20 cents per share,
representing an annual yield of 2.1%. The company's commitment
toward enhancing shareholder return reflects its free cash flow
generating capability, sound liquidity position and well defined
future prospects.
Valuation Looks Reasonable
Nu Skin Enterprises currently trades at a forward P/E of 11.98x,
reflecting a 22.1% discount to the peer group average of 15.37x.
However, its price-to-book ratio of 4.32 is at a substantial
premium to the peer group average of 1.42. Given the long-term
earnings growth projection of 12.6%, the PEG ratio comes in at 1.0,
in line with the benchmark for a fairly priced stock but above the
industry average of 0.6. The return on equity (ROE) for the stock
looks very impressive. It has a trailing 12-month ROE of 34.2%
compared with 11.9% for its peer group.
A Look at the Chart
After witnessing volatility in the past, the 12-month EPS chart
below indicates that the stock price has now started to correlate
with the increasing trend in estimates. Currently, the stock price
is in the range of $35.00 to $40.00, and the consensus estimates
for 2012 and 2013 are steadily moving upward.
Given the earnings growth potential, the strong earnings surprise
history and the ability to sustain dividend increases, the stock is
a solid pick for investors seeking both growth and income. Nu Skin
Enterprises' sound fundamentals are mirrored through strong second
quarter results. Management believes that it will sustain the same
rhythm in the back half of 2012, counting upon its compelling
products lineup.
Founded in 1984 and headquartered in Provo, Utah, Nu Skin
Enterprises is the provider of anti-aging personal care products
and nutritional supplements under the Nu Skin and Pharmanex brands,
and has operations in approximately 52 markets globally. The
company distributes its products in Greater China, South
Asia/Pacific, the Americas, Europe and North Asia, principally
through approximately 900,000 active distributors. Nu Skin
Enterprises, which competes with Avon Products Inc. (
AVP
), currently has a market cap of $2.33 billion.
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