Herbalife Beats Earnings Estimates And Raises Guidance

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Nutritional and weightloss supplement seller Herbalife just beat fourth-quarter earnings estimates and raised its sales guidance.

Herbalife posted $1.05 EPS. Sales came in at $1.1 billion, according to the earnings release.

On average, analysts polled by Bloomberg expected the multi-level marketing firm to post an adjusted EPS of $1.03 on sales of $1.049 billion. 

The stock is up slightly in after-hours.

Here's an excerpt from the release:

Herbalife Ltd. (HLF) today reported fourth quarter net sales of $1.1 billion, reflecting an increase of 20 percent compared to the same time period in 2011 on volume point growth of 18 percent. Net income for the quarter of $117.8 million, or $1.05 per diluted share, compares to 2011 fourth quarter net income of $105.4 million and EPS of $0.86, respectively.

For the twelve months ended December 31, 2012, the company reported record net sales of $4.1 billion, an 18 percent increase on 20 percent growth in volume compared to 2011. For the same period, the company reported net income of $477.2 million, or $4.05 per diluted share, reflecting an increase of 16 percent and 23 percent, respectively, compared to the 2011 results of $412.6 million and $3.30 per diluted share.

“Herbalife continues to deliver record results in sales and profitability as our independent distributors go deeper into existing markets, developing more and more customers using our nutrition products every day,” said Michael O. Johnson, Herbalife’s chairman and CEO. “Obesity and poor nutrition are global public health problems. Our distributors are proud to be part of the solution.”

For the year ended December 31, 2012 the company generated cash flow from operations of $567.8 million, an increase of 11 percent compared to 2011; paid dividends of $135.1 million; invested $122.8 million in capital expenditures; and repurchased $527.8 million in common shares outstanding under our share repurchase program.

Here's the part about raising guidance.  Note a short-seller (a.k.a. Bill Ackman) is mentioned in the release. 

Updated 2013 Guidance

Guidance for fully diluted 2013 EPS is based on the average daily exchange rates of January 2013, which in aggregate are not materially different from the foreign currency exchange rates assumed in our prior guidance. Our 2013 guidance continues to assume a Venezuelan exchange rate of 10 to 1. The guidance does not include the one-time impact associated with the revaluation of our bolivar denominated monetary assets and monetary liabilities, which includes our bolivar denominated cash, due to the recent devaluation of the Venezuelan bolivar, or any potential one-time impact from a future devaluation or the repatriation of existing cash balances. Guidance for the year also excludes one-time costs of $10 million to $20 million, mostly legal and advisory services, relating to the Company’s response to information put into the marketplace by a short seller which information the Company believes to be inaccurate and misleading.

Based on current business trends the company’s first quarter fiscal 2013 and fiscal 2013 guidance is provided below.

Herbalife has become one of the most controversial stocks lately.

That's because hedge fund titan Bill Ackman, the CEO of Pershing Square Capital Management, has publicly declared that he's shorting more than 20 million shares of Herbalife with a price target of $0.  The premise of his thesis is that he believes Herbalife is a pyramid scheme and regulators will be induced to investigate the company.

Herbalife has denied Ackman's claims saying he used "outdated" and "inaccurate information" when putting together his massive 342-slide short case presentation. 

This stock has also created a hedge fund clash of the titans.

On the long side, hedge fund hot-shot Daniel Loeb, the founder of Third Point LLC, disclosed an 8.24% stake in the company back in January.  Loeb is said to have pared back some of his stake, but still remains one of the largest shareholders, according to CNBC's Scott Wapner.

In addition, legendary billionaire investor Carl Icahn, who is a long time Ackman rival, disclosed a 12.98% stake  in Herbalife which includes  shares underlying call options.

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