Herbalife Ltd. (HLF) Earnings Preview: Confidence, Growth, And Ackman

Herbalife Ltd. (HLF) Earnings Preview: Confidence, Growth, And Ackman
By Herbalife International of America, Inc. (http://www.herbalife.com) [CC BY-SA 4.0], via Wikimedia Commons

Herbalife Ltd. (NYSE:HLF) earnings are due to arrive after the market closes on Monday afternoon. The company, which is in the midst of a battle with Bill Ackman over the value of its business, is expected to show earnings per share of $1.15 per share for the three months on revenue totaling $1.2 billion.

Herbalife Ltd. (HLF) Earnings Preview: Confidence, Growth, And Ackman

In the September quarter of 2012, the nutritional supplement seller managed to bring in revenue of $1 billion and turn it into earnings of $1.04 per share. Herbalife Ltd. (NYSE:HLF) has been growing rapidly in recent months and years, but there are some that don’t agree with the company’s business practices. About 20% of the firm’s shares are held short as a result.

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Herbalife short

Bill Ackman, who is leading the campaign to short Herbalife Ltd. (NYSE:HLF), will likely not study this afternoon’s numbers too hard. There’s very little that Herbalife could reveal in an earnings report that would drive the stock down to Ackman’s price target of $0. He needs something a little bit more extreme to make that happen.

Ackman needs some kind of regulator to make moves in the direction of Herbalife Ltd (NYSE:HLF) if he wants his short to earn the kind of money he’s looking for. In order to drive the value of the company to $0, Ackman needs its business model to be declared illegal. He is not alleging accounting fraud at Herbalife, he’s alleging that the company should be shut down by the authorities.

The problem with the Ackman short is that it leaves most of the wok in the hands of a third party. If the FTC does not attempt to shut Herbalife Ltd (NYSE:HLF) down, Ackman could be left holding a huge loss. The company’s performance so far this year has already cut deep into Ackman’s pockets.

Herbalife performance

Herbalife Ltd (NYSE:HLF) shares have more than doubled in value since 2013 began. Some of that rise can be attributed to a large loss in value at the end of last year when Bill Ackman announced his campaign against he company, but most of it is a result of earnings growth and confidence in the company.

Herbalife executives will host a conference call at 11 AM tomorrow morning in order to discuss these earnings numbers. The company’s investors will want to hear about guidance for the year ahead, and they will want to be reassured about the company’s regulatory position.

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