Herbalife Results Miss Estimate; Stock Tanks

(RTTNews) - Herbalife (HLF) Monday reported a decline in second-quarter profit, hurt by poor margins and weak demand in the Americas, overshadowing the growth in Europe and China. Adjusted earnings for the quarter missed Wall Street estimates after consecutive periods of better-than-expected performance.

Herbalife provided some soft guidance for the third quarter. For 2014, the company lifted its adjusted earnings outlook, but slashed sales expectations.

Shares of the company tanked about 10 percent in after-hours trade on the New York Stock Exchange.

Herbalife shares have been witnessing sharp swings. A multi-level marketing company, Herbalife has garnered attention since 2012 after William Ackman of hedge fund Pershing Square accused the company of running a pyramid scheme that would eventually fail. Ackman's allegations have led to federal probes against Herbalife.

Last week, Herbalife shares tumbled after Ackman said he will make a presentation to prove his allegations against the company; but the presentation found lukewarm response from investors, and Herbalife shares gained 25 percent. Ackman holds a short position in Herbalife, which means that he is betting the company's stock will drop.

For the second quarter, Los Angeles, California-based Herbalife posted net earnings of 119.5 million or $1.31 per share, compared with $143.2 million or $1.34 per share last year.

Excluding items, adjusted earnings for the quarter were $141.4 million or $1.55 per share. On average, four analysts polled by Thomson Reuters estimated earnings of $1.57 per share for the quarter. Analysts' estimates typically exclude one-time items.

Sales for the quarter rose 7 percent to $1.31 billion from $1.22 billion a year ago. Analysts estimated sales of $1.36 billion for the quarter.

Volumes were up 5 percent for the quarter, with EMEA up 22 percent, China 38 percent, and Mexico 5 percent. North America edged down 1 percent, and South and Central America 7 percent.

Results were offset by selling, general and administrative costs that rose to $462 million from $400 million last year, and interest expense to $21.4 million from $5.6 million.

For the third quarter, Herbalife projects adjusted earnings of $1.49 to $1.53 per share and sales growth of 9 to 11 percent. Analysts currently expect earnings of $1.62 per share on revenue growth of 10.70 percent.

For fiscal year 2014, Herbalife now expects adjusted earnings of $6.17 to $6.32 per share and sales growth of 8.5 percent to 10.5 percent. The company had previously projected earnings of $6.10 to $6.30 per share and sales growth of 10 percent to 12 percent.

Analysts currently see earnings of $6.30 per share on revenue growth of 11.5 percent for the year.

Herbalife shares are down about 16 percent for the year, despite last week's rally. On Monday, the stock closed at $67.48, up $1.42 or 2.15%, on a volume of 5.8 million shares. In after hours, the stock dropped $6.72 or 9.96%, trading at $60.76.