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Nu Skin Enterprises, Inc. NUS is slated to release second-quarter 2018 results on Aug 2. The Utah-based company’s earnings have surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with a 5.9% miss delivered in the last reported quarter. Let’s see if Nu Skin’s growth drivers can help it get back to its growth trajectory this time.
Nu Skin Enterprises, Inc. Price and EPS Surprise
Nu Skin Enterprises, Inc. Price and EPS Surprise | Nu Skin Enterprises, Inc. Quote
Factors to Consider
Nu Skin is likely to gain from strength in its regional segments, which favored its first-quarter 2018 results. During the quarter, both the top and bottom lines increased year over year. Encouragingly, management raised its revenue projection earlier to a range of $2.5-$2.6 billion, compared with the prior view of $2.4-$2.5 billion. This reflects top-line growth of 10-12% from the year-ago tally and includes a 3% benefit from favorable currency rates.
The Zacks consensus estimate for sales in the Americas, South Asia and EMEA regions for second-quarter 2018 is pegged at $89 million, $66 million and $44.5 million, down 3.3%, 7% and 1%, respectively, from the previous quarter reported figures. The consensus marks for sales in Japan, Mainland China, Hong Kong and South Korea stand at $67 million, $221 million, $66 million and $91 million, up 6.3%, 11.6%, 17.5% and 2.2%, respectively from sales reported in the previous quarter.
The company has been witnessing a rise in customers and sales leaders, driven by its efforts to expand base. Nu Skin saw a growth in sales leaders by 16% and 33% in the first quarter of 2018 and fourth quarter of 2017, respectively. The company’s customers increased 7% during the first quarter of 2018, preceded by improvements of 8%, 7%, 5% and 2% during the fourth, third, second and first quarters of 2017, respectively. The company plans to further empower sales leaders through improved training and technological enhancements. It also relies much on social media as well as well-knit product and marketing programs to widen its customer reach.
However, Nu Skin is facing margin pressure, with gross margin declining year over year for the past few quarters. Gross margin slid approximately 140 basis points (bps) during first-quarter 2018, due to lower margin profile of acquired companies compared with the company’s core business. In fact, gross margin declined approximately 190 bps, 60 bps and 80 bps during the fourth, third and second quarters of 2017, respectively. Such persistent declines in gross margin levels pose considerable threats to the company’s profitability.
Expectations in Numbers
For the second quarter, management anticipates revenues to grow 15-18% to $630-$650 million. This also includes a favorable currency impact of around 5%. Further, Nu Skin envisions earnings for the quarter to range from 86 cents to 91 cents per share, which includes an accounting charge of 5 cents.
Well, the Zacks Consensus Estimate for earnings of 90 cents for the to-be-reported quarter indicates a 16.9% surge year over year. Notably, the estimate has remained stable over the past 30 days. Moreover, the Zacks Consensus Estimate for revenues is $641.7 million, up from $550.1 million recorded in the year-ago period.
What the Zacks Model Unveils
However, our proven model doesn’t show that Nu Skin is likely to beat bottom-line estimates this quarter. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Nu Skin carries Zacks Rank #4 (Sell) and has an Earnings ESP of -0.93%.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks With Favorable Combination
Boston Beer SAM, a Zacks #1 Ranked stock, has an Earnings ESP of +13%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ollie’s Bargain Outlet Holdings OLLI, a Zacks #2 Ranked stock, has an Earnings ESP of +1.57%.
Freshpet FRPT, a Zacks #2 Ranked stock, has an Earnings ESP of +22.86%.
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