Please ensure Javascript is enabled for purposes of website accessibility

Why Herbalife Ltd. Stock Jumped 14% in May

By Jeremy Bowman - Jun 15, 2017 at 11:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The nutritional supplement provider jumped on a better-than-expected earnings report.

What happened

Shares of Herbalife Ltd. (HLF 0.41%) were moving higher last month after the nutritional supplement provider posted a strong first-quarter earnings report. According to data from S&P Global Market Intelligence, the stock finished up 13.5% for the month of May.

As the chart below shows, the gains came following the company's earnings release at the beginning of the month.

HLF Chart

HLF data by YCharts

So what

Shares of Herbalife gained 12% on May 5 as the multi-level marketer delivered quarterly results ahead of its own guidance. Volume sales grew 1% in the quarter though overall revenue fell 2% to $1.1 billion due to currency exchange. That still beat estimates of $1.04 billion.

On the bottom line, adjusted earnings per share fell from $1.35 a year ago to $1.24, but that also beat expectations at just $0.87. The report was closely watched as it was the company's first quarter since the Federal Trade Commission mandated changes in its business model after Herbalife paid a $200 million fine last year to settle allegations of being a pyramid scheme.

The Herbalife logo

Image source: Herbalife.

CEO Michael Johnson said the quarter marked a "solid start to 2017" and touted the strength of the company's direct-selling model.

Now what

Herbalife also raised its guidance in the quarter as it's now calling for adjusted EPS of $4.05 to $4.45, up from a previous range of $3.65 to $4.05. Much of that was due to an adjustment in currency headwinds, however.

In June, Herbalife ran into some problems as the company issued a sales warning, saying that the second quarter would be challenging as its distributors adjusted to new requirements. However, the company increased its full-year adjusted EPS guidance to $4.10-$4.50. The stock fell 7% on the news, but has since recovered some of those losses.

While Herballife, which is a popular short, will remain a controversial stock, its business looks solid for now. I'd expect the stock to lose some of the volatility that investors are used to.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Herbalife Ltd. Stock Quote
Herbalife Ltd.
$29.25 (0.41%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.