Shares of Herbalife Ltd. (HLF) reached a 52-week high of $76.65 on Tuesday, Dec 3, 2013 after a Belgian court ruled in favor of the company.
The company had been facing accusations from hedge fund manager William Ackman and Belgian consumer organization Test-Aankoop regarding its pyramid scheme business model i.e. deceptive marketing practices employed for improving business. Per the accusation, through such a scheme, the company earns most of its money by recruiting new sales people and not from the products that they sell. However, the court quashed the allegations and stated that the company’s sales model complied with Belgian law.
Moreover, since its impressive third quarter earnings call on Oct 28, 2013, the company’s share price edged up 13.4%. Earnings surpassed the Zacks Consensus Estimate of $1.14 by 23.68%. Revenues also beat the Zacks Consensus Estimate of $1,195 million by 1.59%. The company posted a positive four quarter average earnings surprise of 15.46%.
With 13.0% volume growth in the quarter, we believe that solid demand for its products (especially weight management products), product innovations and numerous growth strategies will drive the stock going forward.
Herbalife is a global nutrition company that sells weight management products, nutritional supplements, energy, sports and fitness and personal care products worldwide. Herbalife offers its products through retail stores, sales representatives, sales officers and independent service providers.
The company presently has a short-term Zacks Rank #2 (Buy). Some other stocks worth considering in the sector include Quiksilver Inc. (ZQK), Walgreen Co. (WAG), and Best Buy Co., Inc. (BBY). While Quiksilver Inc. holds a Zacks Rank #1 (Strong Buy), Walgreen Co. and Best Buy Co. carry a Zacks Rank #2 (Buy).