Herbalife Ltd. (NYSE:HLF) will release its second quarter 2014 financial results after the close of trading on the NYSE on Monday, July 28, 2014. The following day, Tuesday, July 29, 2014 at 8 a.m. PT (11 a.m. ET), Herbalife's senior management team will host an investor conference call to discuss its recent financial results and provide an update on current business trends.
Wall Street anticipates that the Consumer Goods company will earn $1.57 per share for the quarter, which is $1.16 more than last year's profit of $1.41 per share. iStock expects Herbalife to beat Wall Street's consensus number, the iEstimate is $1.64.
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Revenue, like earnings per share (EPS), is expected to move higher by 11.10% year-over-year (YoY). The consensus revenue estimate for Q2 is $1.35 billion versus last year's $1.22 billion.
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Herbalife is probably one of if not the most controversial publicly traded companies with activist, billionaire investors taking sides – it is a pyramid scheme taking advantage of the poor versus it's a legitimate business helping the poor.
Either way, Herbalife sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products worldwide. The company offers science-based products in four principal categories, including weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition.
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If Google Trends' reflect HLF's business trends, then the shorts could have their way post-EPS. Search Volume Intensity (SVI) is down 8.2% in the second quarter compared to the first quarter of 2014. Considering quarter-over-quarter (QoQ) revenue is expected to climb 6.9%, that could be a problem.
A revenue miss would be a shocker for the nutrition company because it has not happened in the last 20 quarters. Nor, has Herbalife missed earnings in the last five years. Only once did the company meet expectations; otherwise, 19 bullish earnings surprises.
Oh my, as Dick Enberg would say.
After that review, it's hard to hold the sales miss hat with any degree of comfort, but all good things mist come to an end – like being young and being able to eat what you want without consequence.
Another non-consequence thing that can't live forever is rising costs relative to sales. In the first quarter, Herbalife's cost of sales plus royalty overrides plus selling, general & administrative expenses increased to 89.89% versus 84.97% the previous year. That's a big difference.
Management blamed the upswing in costs on "higher net foreign exchange loss primarily due to an $86.1 million net foreign exchange loss related to the remeasurement of the Company's (Venezuelan) Bolivar-denominated monetary assets and liabilities."
If the debasement is a on-off event, then no big deal as operating margin would have actually nudged to the HLF's favor a touch minus the $76 million dollar write-off.
Overall: Herbalife Ltd.'s (NYSE:HLF) nearly spotless record of bullish earnings and sales surprises makes it next to impossible to believe either could fall short of expectations; however, SVI for "Herbalife" warns that Monday's results could disappoint in some way. We'd be careful getting in front of this one's earnings announcement.
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