What's in Store for Nu Skin (NUS) This Earnings Season? - Analyst Blog
Nu-Skin Enterprises, Inc. NUS is set to report first quarter fiscal 2015 results on May 6 after the market closes. Last quarter, the company posted a negative earnings surprise of 4.94%. Let's see how things are shaping up for this announcement.
Factors to Consider This Quarter
Multi-level marketer Nu Skin has been witnessing revenue declines due to significant currency headwinds. Last quarter, currency fluctuations negatively impacted sales by 4% ($100 million). Other than that, Venezuela currency issues have also been hurting revenues and earnings significantly in the past.
Also, Nu Skin has been witnessing a decline in Greater China since the past few quarters. This is a concern as the company gets more than a third of its total revenue from the region, which includes Taiwan and Hong Kong. Last quarter, the company witnessed sales decline in all the geographic regions, with Greater China declining 55%. The regulatory steps undertaken by the company in Mainland China to review a legal issue also impacted sales negatively in the reported quarter.
One of the primary concerns is that China has always been suspicious about direct selling companies like Nu Skin and Herbalife Ltd. (HLF). Both these companies employ sales representatives to sell products and are always in the eyes of rivals and regulators. They face accusations like focusing more on recruiting instead of selling products and of running a pyramid business model i.e. employing deceptive marketing practices for improving business.
Lack of product innovation is also a cause for decline. Nu Skin did not did not launch any new product after introducing TR90 weight management system in the fourth quarter of 2013.
In 2015, the company expects to witness organic growth. Also, the company has several product launches in the pipeline such as anti-ageing products in both nutrition (ageLOC Youth supplement) and skin care (ageLOC Me anti-ageing skin cream) categories. However, it continues to expect currency headwinds to weigh on the top line.
For the first quarter of fiscal 2015, this skin care and nutritional products retailer expects sales in the range of $530 million to $550 million, including a negative foreign currency impact of $50 million. It expects earnings in the range of 70 to 74 cents.
The Zacks Consensus Estimate for the first quarter stands at 73 cents; while that for revenues is pegged at $542 million. Both the estimates are within the company’s range.
Earnings Whispers?
Our proven model does not conclusively show that Nu Skin is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP:ESP for Nu Skin is 0.00% as both the Most Accurate Estimate and Zacks Consensus Estimate stand at 73 cents per share.
Zacks Rank #4 (Sell): Nu Skin holds a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the consumer staples sector, which are worth considering, as our model shows that they have the right combination of these two elements:
Energizer Holding, Inc. ENR with an Earnings ESP of +1.74% and a Zacks Rank #3 (Hold)
Tyson Foods, Inc. TSN with an Earnings ESP of +1.37% and a Zacks Rank #3.
Treehouse Foods Inc. THS with an Earnings ESP of +1.72% and a Zacks Rank #3
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