Nu Skin Earnings Double As China Sales Explode

Investor's Business Daily

Nu Skin Enterprises (NUS) on Tuesday reported blowout third-quarter earnings led by soaring China sales, extending its long streak of quarterly outperformance.

The direct marketer of skin care products and nutritional supplements also raised its full-year outlook for the fourth time since its initial guidance last November.

Nu Skin shares surged 8% to 111.33, hitting a record 119.46 intraday.

The Provo, Utah-based company earned $1.80 a share, up 107% vs. Q3 2012 and 38 cents over views, its best growth in years. Revenue leapt 76% to $927.6 million, the ninth straight quarter of double-digit growth. Nu Skin has beaten estimates on both measures the past eight quarters.

China Boom

Revenue in greater China jumped 240% to $464.6 million. South Asia-Pacific sales grew 40% to $56.9 million, the Americas 22% to $85.7 million, and North Asia 11% to $204.7 million, including currency fluctuations.

"The growth in China is stratospheric and Greater China is now Nu Skin's No. 1 market," D.A. Davidson analyst Tim Ramey wrote in a report. "That comes with its own set of risks, and opportunities.

President and CEO Truman Hunt also cited a "tremendous" initial response to a limited-time-offer rollout of its ageLOC TR90 weight management system.

The system was launched in greater China and South Asia in September, with a broader rollout in the current Q4.

"A combination of stronger-than-expected recruiting trends around the world, as well as the positive impact of the introduction of this new weight management product were really the two key drivers," said Wedbush Securities analyst Rommel Dionisio.

Asia has long been Nu Skin's core market, accounting for nearly 80% of 2012 revenue. The Americas is next at 13%.

Nu Skin has been trying to expand in Latin America and Europe, Dionisio said. Direct sellers typically have markets where they penetrate faster, he noted. Herbalife is big in Mexico, while Avon (AVP) and Tupperware (TUP) are popular in South America.

Nu Skin lifted its full-year guidance, projecting Q4 EPS of $1.85-$1.90, far above Thomson Reuters consensus of $1.64. It also raised its full-year sales outlook, implying Q4 revenue of $1.019 billion-$1.049 billion vs. analyst projections of $905 million.

Analysts are bullish on Nu Skin going forward.

"They're building their sales network, they're expanding into new markets around the world, launching new products," Dionisio said. "We're enthusiastic about their growth prospects long term."

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