Can Herbalife Earnings Keep the Stock Soaring?

Herbalife (NYSE: HLF  ) will release its quarterly report on Monday and, as the subject of attention from some of the most influential investors in the market, the company can expect fireworks to ensue. In the midst of such a public battle between bullish and bearish investors, it's easy to lose sight of company fundamentals, but Herbalife earnings might help make the case clearer for one side over the other.

Herbalife has faced serious accusations lately, with hedge-fund manager Bill Ackman referring to the company's business model as a pyramid scheme. Yet, equally prominent investor Carl Icahn has taken the opposite side of Ackman's short trade, buying up a big stake in the company, and making moves to put two representatives on the Herbalife board. Meanwhile, though, the company is still in business to make money, and must keep operating despite the controversies. Let's take an early look at what's been happening with Herbalife over the past quarter, and what we're likely to see in its quarterly report.

Stats on Herbalife

Analyst EPS Estimate

$1.18

Change From Year-Ago EPS

7.3%

Revenue Estimate

$1.16 billion

Change From Year-Ago Revenue

12.4%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

How fast can Herbalife earnings grow?
Analysts have had mixed views about Herbalife earnings recently, pulling back on their estimates for the June quarter by $0.08 per share, but boosting their projections for the full 2013 and 2014 years. The stock, though, has been unequivocal in its upward movement, climbing 60% just since late April.

Herbalife started out the quarter well for Icahn and other bullish investors, reporting first-quarter financial results that featured a 17% jump in revenue, and earnings per share that jumped 20%. The company also gave favorable guidance, with expectations of 13% to 15% sales growth producing $4.60 to $4.80 in earnings per share for the full 2013 year.

Fundamentally, the company is in the middle of an industry that's gaining in importance, as people pay more attention to the obesity epidemic. Weight-specialists Weight Watchers and NutriSystem come at the industry from a slightly different angle, with more specialization on weight specifically, without the diverse personal-care and other products that Herbalife offers, and they've faced some challenges in producing growth. GNC Holdings (NYSE: GNC  ) , which is arguably a more direct competitor that resembles Herbalife more closely, reported earnings earlier today that rose by 18% from the previous year, sending its stock up nearly 11% in today's trading.

Herbalife recently made a deal with sports and entertainment company AEG Worldwide expanding its existing relationship under which Herbalife sponsors the shirts of the LA Galaxy major-league soccer team. The new deal adds Sweden's Hammarby team to the mix, with the hopes of boosting Herbalife's international exposure.

Still, all attention will remain on the Icahn/Ackman battle for the foreseeable future, especially as it now appears to be as much a personal fight as a difference of investment opinion. One big question is how much in losses Ackman can afford to absorb before a short squeeze of massive proportion results. But for now, neither investor is giving the other any quarter.

In the Herbalife earnings report, watch to see how the company responds to the ongoing drama. Ideally, the company should be able to rely on its fundamental results and let its numbers do the talking for it.

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