GNC Holdings, Inc. GNC has been consistently delivering impressive results supported by a few encouraging developments.
This leading global specialty retailer of health and wellness products, which include vitamins, minerals and herbal supplements as well as sports nutrition, has a market cap of $213.1 million.
Here we discuss the factors that make this Zacks Rank #3 (Hold) company worth holding onto for now.
Strategic Partnerships: GNC Holdings’ recent joint venture with a vitamins and nutritional supplement manufacturer — International Vitamin Corporation — holds promise. Apart from this, GNC Holdings has been progressing well in terms of its joint venture with Harbin Pharmaceutical Group, which was signed in 2018.
Expansion in International Market: GNC Holdings continues to gain traction in India and has delivered initial product shipments to its Japanese and Australian partners. The company has also inked a partnership agreement, which should establish its foothold in the $3-billion Brazilian market.
Strong Balance Sheet: GNC Holdings exited the second quarter with cash and cash equivalents of $95.9 million. Year-to-date net cash flow from operating activities totaled $65.3 million. Further, the company generated year-to-date free cash flow of $58.9 million compared with $40.8 million in the prior-year quarter.
However, there are a few factors which have been impeding growth lately.
Dull Revenue Growth: During the second quarter, GNC Holdings’ revenues from the U.S. & Canada segment fell 8% year over year to $476.1 million. Notably, e-commerce sales accounted for 8.1% of U.S. and Canada revenues, down from 8.3% in the prior-year quarter.
Competitive Headwinds: In the United States, GNC Holdings competes for sales with heavily advertised national brands that belong to big pharmaceutical and food companies as well as other retailers. The company’s international competitors include large international pharmacy chains, major international supermarket chains and other major U.S.-based companies with international operations.
In the past year, the company has underperformed its industry. The stock has plunged 41.8% compared with the industry’s 23% decline.
Which Way Are Estimates Treading?
For the third quarter of 2019, the Zacks Consensus Estimate for loss is pegged at 2 cents against year-ago earnings of 2 cents. The same for revenues is pegged at $508 million, calling for year-over-year decline of 12%.
For 2019, the Zacks Consensus Estimate for earnings is pegged at 30 cents that suggests an 11.8% year-over-year decline. The same for revenues is pegged at $2.08 billion, which indicates an 11.7% fall from the prior-year quarter’s reported figure.
A few better-ranked stocks in the broader medical space are Haemonetics HAE, NuVasive NUVA and Amedisys AMED, each carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics’ long-term earnings growth rate is expected to be 13.5%.
NuVasive’s long-term earnings growth rate is projected at 10.9%.
Amedisys’ long-term earnings growth rate is expected to be 16.26%.
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