Surging Earnings Estimates Signal Upside for Herbalife LTD. (HLF) Stock
Herbalife LTD. (HLF) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For Herbalife LTD. There has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $1.27 per share for the current quarter, which represents a year-over-year change of +33.68%.
Over the last 30 days, the Zacks Consensus Estimate for Herbalife LTD. has increased 5.83% because one estimate has moved higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $4.96 per share represents a change of +33.69% from the year-ago number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Herbalife LTD. Over the past month, one estimate has moved higher compared to no negative revisions, helping the consensus estimate increase 9.98%.
Favorable Zacks Rank
The promising estimate revisions have helped Herbalife LTD. earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
While strong estimate revisions for Herbalife LTD. have attracted decent investments and pushed the stock 15.4% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.
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