Markets
HLF

What's in Store for Herbalife (HLF) this Earnings Season?

Herbalife Ltd.HLF is set to report fourth-quarter 2016 results on Feb 23. The question lingering in investors' minds is, whether the company will be able to maintain its positive earnings surprise streak in the to-be-reported quarter. In fact, the company has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average of 19.7%.

Herbalife forms part of the Retail-Wholesale sector. Per the latest Zacks Earnings Preview , we note that the above mentioned sector's earnings growth looks disappointing. Total earnings for the sector are estimated to decline 1.2%, while revenues are projected to improve 4.7%.

Let's delve deeper how things are shaping up for this announcement.

Which Way are Estimates Treading?

Let's look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company right before the earnings release. The current Zacks Consensus Estimate for the quarter under review has remained unchanged over the past 30 days and is currently pegged at 92 cents, down 22.7% from $1.19 delivered in the year-ago quarter.

Herbalife LTD. Price, Consensus and EPS Surprise

Herbalife LTD. Price, Consensus and EPS Surprise | Herbalife LTD. Quote

What the Zacks Model Unveils?

Our proven model does not conclusively show that Herbalife is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Herbalife has an Earnings ESP of -2.17% as the Most Accurate estimate of 90 cents is lower than the Zacks Consensus Estimate of 92 cents. Herbalife has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need a positive ESP for an earnings beat.

Factors Influencing the Quarter

Herbalife expects sales in the range of down 2.5% to up 1.5% and volume in the range of down 1.5% to up 2.5% in the fourth quarter. On a currency adjusted basis (excluding the impact of Venezuela price increases tied to foreign exchange rate movements), sales are expected in the range of down 0.5% to up 3.5%.

For the fourth quarter, the company expects adjusted earnings per share in a range of 80 cents to $1.00 per share, which includes an unfavorable currency impact of approximately 12 cents per share. Excluding the currency impact (excluding the impact of Venezuela price increases tied to foreign exchange rate movements), adjusted earnings are expected in a range of 92 cents to $1.12 per share.

Coming to the share price movement, Herbalife's shares have increased 28.2% in the past one year, higher than the Zacks categorized Retail-Drug Stores industry's decline of 8.0%.

We note that this weight management and nutritional products company is witnessing volume improvement in key markets like Europe, the Middle East and Africa, primarily impacted by its marketing plan changes, which were implemented in Feb 2015. In fact, the company is seeing sequential improvements in key metrics in these markets and remains encouraged by the positive trends. The company anticipates that these improvements will lead to volume growth in the to-be-reported quarter.

However, unfavorable currency, which is a major headwind for the company, is expected to hurt earnings in the quarter to be reported.

Stocks to Consider

Stocks in the broader retail sector carrying both a positive Earnings ESP and a favorable Zacks Rank, and therefore worth considering include:

SpartanNash Company SPTN has an Earnings ESP of +2.04% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Jack In The Box Inc. JACK has an Earnings ESP of +2.42% and carries a Zacks Rank #2.

Fred's Inc. FRED has an Earnings ESP of +15.79% and carries a Zacks Rank #3.

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks - absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Fred's, Inc. (FRED): Free Stock Analysis Report

Herbalife LTD. (HLF): Free Stock Analysis Report

Jack In The Box Inc. (JACK): Free Stock Analysis Report

SpartanNash Company (SPTN): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

HLF SPTN JACK

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More