Thursday, November 1, 2012


Herbalife Ltd. (HLF) released Q3 2012 results on Monday, October 29.

Net Sales of $1.0 billion (+14%) were driven by a 17% increase in volume points over the prior year period. A 100 bps decrease in EBIT margin (15.3%) during the quarter was due to FX headwinds. Net Income totalled $117.8 - a 9% increase over Q3 2011.

Q3 EPS of $1.04 beat the consensus estimate by $0.03 or 3%. EPS guidance for FY 2012 has been raised from $3.88 - $3.98 to $3.99 - 4.03. Management has also introduced full-year 2013 guidance of $4.40 - $4.55.

Regarding our thesis, the expansion of the daily consumption DMO among distributors has continued into Q3. HLF now estimates the number of nutrition clubs worldwide to be 43,000, representing an increase of 18% versus Q2. Daily consumption distribution methods now account for approximately 40% of total sales volume (vs. 37.5% in Q2). Additionally, the company continues to invest in infrastructure to support global growth. During Q3, HLF's board approved the construction of a $130 million East Coast (U.S.) manufacturing facility that management anticipates will be complete and operational in 2014.

Shares opened +4.6% when trading resumed Wednesday (October 31) morning.

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