Herbalife Lifts Q4, 2013 Outlook; Boosts Share Buyback, Plans Debt Offering

(RTTNews) - Herbalife Ltd. (HLF) on Monday raised its financial outlook for the fourth quarter as well as fiscal 2013 and maintained its earnings outlook for fiscal 2014. However, the company forecast earnings per share for the first quarter below analysts' estimates.

In addition, Herbalife increased its share repurchase program to $1.5 billion and said it plans to offer $1 billion in convertible senior notes due 2019.

Herbalife is a multi-level marketing company that sells nutritional supplements, energy, sports and fitness products. It has been at the center of attention for investors ever since William Ackman, the activist manager of hedge fund Pershing Square, called it a pyramid scheme that would fail soon.

Nonetheless, the company found support with billionaire activist investor Carl Icahn who became a major shareholder of Herbalife. Icahn said that Herbalife has a legitimate business model.

For the fourth quarter, Herbalife now forecasts adjusted earnings in a range of $1.26 to $1.30 per share, reported earnings of $1.13 to $1.17 per share, and sales growth of about 18.5 percent. The company noted that there were no adjustments reported against its year-ago quarter results.

Earlier, the company forecast adjusted earnings of $1.11 to $1.15 per share for the fourth quarter on sales growth in a range of 13.5 to 15.5 percent.

On average, analysts polled by Thomson Reuters currently expect the company to report earnings of $1.17 per share for the fourth quarter on revenue growth of 15.50 percent to $1.22 billion. Analysts' estimates typically exclude special items.

For fiscal 2013, Herbalife now forecasts adjusted earnings in a range of $5.35 to $5.39 per share, reported earnings of $4.89 to $4.93 per share, and sales growth of about 19.8 percent. The company noted that there were no adjustments reported against its 2012 results.

Previously, the company projected adjusted earnings of $5.19 to $5.23 per share for the year on sales growth of 17 to 17.5 percent.

Analysts currently estimate earnings of $5.26 per share for the year on revenue growth of 17.40 percent to $4.78 billion.

Herbalife expects to report its fiscal 2013 financial results on February 18, 2014.

Looking ahead to the first quarter of fiscal 2014, the company projects adjusted earnings in a range of $1.24 to $1.28 per share, despite an adverse foreign currency exchange rate impact of about $0.20 compared to the prior year's results. Street expects the company to earn $1.40 per share for the quarter.

Further ahead, for fiscal 2014, Herbalife maintained its outlook for adjusted earnings of $5.45 to $5.65 per share, despite an adverse foreign currency exchange rate impact of $0.10 compared to prior guidance.

The company's board of directors has increased its existing share repurchase authorization to an available balance of $1.5 billion, from the previous share repurchase authorization of $1 billion that had an available balance of $653 million. The company expects to begin repurchasing shares of its common stock.

In a separate statement, Herbalife said it plans to offer $1 billion principal amount of convertible senior notes due August 2019 in a private offering to qualified institutional buyers. The initial purchasers of the convertible notes will be Bank of America Merrill Lynch, Credit Suisse, HSBC and Morgan Stanley.

The company expects to grant an option to the initial purchasers to buy up to an additional $150 million of convertible notes. The company expects to use the net proceeds from the sale of the convertible notes to fund the cost of repurchasing its common shares and also use the remaining net proceeds from the offering for working capital and general corporate purposes.

The convertible notes are expected to pay interest semiannually, and upon conversion, will be settled in cash. If applicable, the notes may also be converted into the company's common shares, based on a conversion rate to be determined at the pricing of the convertible notes.

Prior to May 15, 2019, the convertible notes will be convertible only upon the occurrence of certain events and during certain periods. Thereafter, the notes will be convertible at any time until the second scheduled trading day immediately preceding the maturity date.

HLF closed Friday's trading at $64.37. In Monday's pre-market, the stock is adding $1.62 or 2.52 percent to $66.00.