Bull of the Day: Nu Skin (NUS)

Todd Bunton
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Nu Skin (NUS) recently delivered the coveted 'triple play':

  • A positive earnings surprise

  • A positive revenue surprise, and

  • Increased guidance from management

This was driven in large part by soaring sales in Greater China and expanding profit margins. Analysts revised their estimates significantly higher after the latest beat, sending the stock to a Zacks Rank #1 (Strong Buy).

Nu Skin Enterprises, Inc. is a global direct selling company that develops and distributes personal care products and nutritional supplements. It operates in 53 markets worldwide, and its products are primarily sold under the Nu Skin and Pharmanex brands. The company reports revenue in five geographical segments:

  • Greater China (42% of total revenue)

  • North Asia (27%)

  • South Asia/Pacific (13%)

  • Americas (12%)

  • EMEA (6%)

Third Quarter Results

Nu Skin delivered a nice 'beat and raise' quarter on October 22. The company reported earnings per share of $1.80, crushing the Zacks Consensus Estimate by 27%. It was more than double EPS in the same quarter last year.

Revenue jumped 76% to $927.6 million, well ahead of the consensus of $815.0 million. Each segment experienced top-line growth, but its largest segment - Greater China - was remarkable as revenue surged 240%.

Gross profit as a percentage of total revenue was an impressive 84.9%, up from 83.5% in the same quarter last year. The operating margin improved from 15.7% to 18.1% due in large part to operating leverage. General and administrative expenses, for instance, improved from 23.1% to 17.5% of revenue.

Increased Guidance

Following better-than-expected Q3 results, management raised its guidance for the remainder of the year. The company now expects 2013 EPS between $5.77-$5.82 on revenue of $3.18-$3.21 billion. This prompted a big increase in estimates from analysts, not just for this year but for next year too.

This sent the stock to a Zacks Rank #1 (Strong Buy).

Earnings estimates have been surging over the last several months, in fact, as Nu Skin has reported 8 straight positive earnings surprises:

Based on current consensus estimates, analysts expect 66% EPS growth in 2013 and 15% growth next year.

Reasonable Valuation

Shares of Nu Skin have been on an absolute tear this year, climbing more than 220% year-to-date.

Despite this incredible run, valuation still looks reasonable with shares trading at less than 18x 12-month forward earnings, which is in-line with the industry.

The Bottom Line

With sales soaring, profit margins expanding, earnings estimates rising, and valuation still reasonable, Nu Skin offers investors attractive upside potential.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.


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