Shares of Nu Skin Enterprises, Inc. NUS have not only declined but also underperformed the industry in the past six months. This Zacks Rank #3 (Hold) company has lost 23.2% in the said time frame compared with the industry’s decline of 14.7%.
This can be attributable to the company’s trend of dismal margins for quite some time. Notably, gross margin slid approximately 190 basis points (bps) during third-quarter 2018. Also, gross margin went down approximately 180 bps and 140 bps during the second and first quarters of 2018. Such persistent declines in gross margin levels pose considerable threats for the company’s overall profitability.
Additionally, adverse impacts from currency fluctuations hurt the company’s bottom line in the third quarter. Going ahead, management expects currency translations to drag down earnings in 2018 by approximately 20 cents. In fact, earnings per share for 2018 are now projected to be $3.48-$3.55 compared with the previous view of $3.50-$3.65.
Brighter Side of the Story
Despite these concerns, we expect Nu Skin’s effective strategies to provide some respite and aid the stock in 2019. To this end, Nu Skin’s robust network of sales leaders and customers bodes well. We note that the company’s top line has been consistently benefitting from growth in sales leaders. In fact, during the third quarter of 2018, sales leaders improved approximately 14%. This was preceded by a rise of 21% and 16% in the second and first quarters of 2018, respectively, and an improvement of 33% during the fourth quarter of 2017.
Moving on, the company is focused on its plans to further empower sales leaders through improved training and technological enhancements. In this regard, Nu Skin has been working toward expanding its sales compensation program, Velocity across different nations. Management expects Velocity to be a significant driver in expanding the company’s business in the future.
Moreover, Nu Skin boasts a strong customer base, which boosts growth in sales leaders. Incidentally, the company’s customer base grew approximately 9% during the third quarter. This followed a respective rise of 8% and 7% in the second and first quarters of 2018. The company relies much on social media along with well-knit product and marketing programs to widen its customer reach. Further, the company is making efforts to gain market share via well-strategized product programs and advanced technology.
All said, we expect that the company’s growth drivers to provide cushion to the stock in 2019.
3 Hot Picks
Sally Beauty Holdings SBH, with long-term earnings per share growth rate of 5%, carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Estee Lauder EL, with long-term earnings per share growth rate of 11.9%, carries a Zacks Rank #2 (Buy).
e.l.f Beauty ELF, with long-term earnings per share growth rate of 6.8%, also carries a Zacks Rank #2.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
e.l.f. Beauty Inc. (ELF) : Free Stock Analysis Report
Nu Skin Enterprises, Inc. (NUS) : Free Stock Analysis Report
Sally Beauty Holdings, Inc. (SBH) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research