Guilty By Association: Herbalife Still Has Lots of Life

by Louis Navellier | May 7, 2012 12:30 pm

Our most discussed stock last week by far was Herbalife (NYSE:HLF[1]), which gapped down sharply this week after its first-quarter earnings announcement.

Herbalife announced record operating results for the first quarter. Compared with the same quarter last year, earnings jumped 24% to $108.2 million, or 88 cents per share. This topped the 81 cents per share consensus earnings estimate by 9%.

Over the same period, net sales climbed 21% to $964.2 million. In North America, the company’s sales advanced 26%, in South and Central America they jumped 32% and in Asia Pacific they rose 30%.

Buoyed by strong sales growth across all six regions, management has raised its 2012 earnings guidance. For the rest of the year, the company sees earnings in the range of $3.58 to $3.74 per share; this tops the Street view of $3.65 per share.

In addition, the board approved a quarterly payment of 30 cents per share. Shareholders of record on May 15 will receive this payment on May 30. Currently, Herbalife’s annual dividend yield is 1.7%, which is the highest in the Drug-Related Products industry.

Nonetheless, shares of Herbalife dropped. Driving this sell-off was hedge-fund manager David Einhorn, who questioned the company about a minor detail in its financials during its conference call.

From what I see, Einhorn was just trying to manipulate the stock for a quick short sale, and while he got his wish in the short term, this does not impact my long-term outlook for HLF.

This company is profiting from the U.S.’s obsession with weight loss and healthy living[2], and it still has plenty of room to grow. ¬†You simply can’t keep a good company like this down for long.

Although many investors got caught up in the panic sell, the fact remains that one short-seller’s comments don’t change this company’s prospects. I expect the stock to bounce back as other investors realize this, so I reiterate my buy recommendation.

Endnotes:
  1. HLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=HLF
  2. weight loss and healthy living: http://investorplace.com/2012/04/the-profitable-mega-trend-few-investors-are-talking-about/

Source URL: http://investorplace.com/2012/05/guilty-by-association-herbalife-still-has-lots-of-life-hlf/
Short URL: http://invstplc.com/1nAaaTV