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Will Currency be a Drag on Nu Skin's (NUS) Q4 Earnings?

Zacks Equity Research

Nu Skin Enterprises, Inc. NUS is slated to release fourth-quarter and 2018 results on Feb 13, after market close. This Utah-based personal care products company has a mixed earnings surprise history for the trailing four quarters. Let’s see how things are shaping up prior to the upcoming quarterly announcement.

Customers & Sales Leaders to Boost Performance

Nu Skin sells and distributes products through a network of sales leaders as well as customers that are spread across 50 global markets. Notably, the top line is consistently benefitting from growth in sales leaders. Additionally, the company is focusing to empower sales leaders through improved compensation, training and technological enhancements. In this regard, it is expanding the sales compensation program, Velocity, in different countries.

Moving on, Nu Skin boasts an expanding customer base that boosts growth in sales leaders as well. The company primarily relies on social media as well as well-knit product and marketing programs to expand its reach. Incidentally, customers grew approximately 9%, 8% and 7% in the trailing three quarters, respectively. Such upsides combined with effective product launches are likely to aid Nu Skin’s performance in the impending quarter.

Nu Skin Enterprises, Inc. Price, Consensus and EPS Surprise

 

Nu Skin Enterprises, Inc. Price, Consensus and EPS Surprise | Nu Skin Enterprises, Inc. Quote

 

Gross Margin & Currency Woes

Nu Skin’s gross margin has been unimpressive for a while. Gross margin slid approximately 190 basis points (bps), 180 bps and 140 bps during the third, the second and the first quarters of 2018, respectively. Such persistent declines in gross margin levels are considerable threats for the company’s overall profitability.

Also, unfavorable impacts from currency rates are a roadblock for the company. We note that a major share of Nu Skin’s revenues is sourced from international markets, thereby exposing the company to significant currency risks. In fact, the bottom line in the third quarter was hurt by foreign currency translation losses of almost 7 cents. Management earlier projected currency translations to drag earnings in 2018 by approximately 20 cents, which is a concern for the to-be-reported quarter as well. In fact, management expects fourth-quarter earnings per share in the range of $1.00-$1.07, including charges of 4 cents stemming from purchase accounting. This estimate reflects a considerable decline from earnings of $1.20 delivered the year-ago quarter.  

Further, management anticipates revenues in the range of $665-$685 million, compared with year-ago quarter’s tally of $666 million. All said, let’s take a look at the Zacks Consensus Estimate for the upcoming quarter as well as the Zacks Model.

Estimates for the Quarter

The Zacks Consensus Estimate for fourth-quarter 2018 earnings is currently pegged at $1.03 per share, reflecting a decline of 14.2% from the year-ago quarter’s tally.

Further, the Zacks Consensus Estimate for the impending quarter’s revenues is currently pegged at $673.3 million, depicting moderate growth of 1% from the year-ago quarter’s reported figure.

Zacks Model

Our proven model does not show that Nu Skin will beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can see the complete list of today’s Zacks #1 Rank stocks here.

Although Nu Skin carries a Zacks Rank #3, its Earnings ESP of 0.00% makes us less confident about an earnings surprise. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that they have the right combination of elements to beat earnings.

Turning Point Brands, Inc TPB has Earnings ESP of +11.11% and a Zacks Rank #2.

Nomad Foods Limited NOMD has an Earnings ESP of +1.45% and a Zacks Rank #2.

Ollie's Bargain Outlet Holdings, Inc OLLI has an Earnings ESP of +0.21% and a Zacks Rank #2.

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Ollie's Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
 
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