Herbalife Ltd. (HLF) Q1 Earnings: What To Expect?

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Herbalife Ltd. (NYSE:HLF), the global nutrition company that sells weight management, nutrition and personal care products, will announce its first quarter 2014 financial results after hours on Monday, April 28, 2014. The earnings release will be followed the next day by an investor conference call at 11 AM EDT.

Analysts’ views

Analysts expect the company to report March quarter revenue of $1.23 billion and earnings per share of $1.29. These compare with $1.12 billion and $1.27 respectively in the year ago period.

Last month, the company was downgraded to a Hold rating by analysts at Argus citing significant risks posed by the FTC investigation that would limit the stock’s near-term potential for upside. However, on a five-year basis, Argus reaffirmed its Buy rating on Herbalife Ltd. (NYSE:HLF), keeping in mind the company’s earnings growth and strong balance sheet.

Taking stock of the battlefield

Herbalife Ltd. (NYSE:HLF) is under siege from billionaire activist investor Bill Ackman who holds a $1 billion short bet on the stock and contends that the company is a pyramid scheme whose value will soon touch zero.

Deep pocketed investors such as George Soros, Carl Icahn and William Stiritz have taken up opposing long positions, making the stock a veritable battleground of Wall Street titans.

Herbalife Ltd. (NYSE:HLF) has, in the meanwhile, pulled out all the stops in a lobbying war against what it calls is a “coordinated, well funded attack from notorious hedge fund manager Bill Ackman, motivated by one thing: winning a billion-dollar bet he made against Herbalife.” The company has doubled its spending on political lobbying and hired Hispanic political leaders. “The expansion of our team is in direct response to his attacks and is hiring of multiple lobbyists, PR firms and so-called grassroots organisers,” said the company.

FTC investigation

The company’s reputation, however, took a knock last month when the FTC initiated a civil probe into its business practices. Earlier, Sen Edward Markey, a Democrat from Massachusetts, had appealed to the FTC as well as the US SEC to investigate Herbalife. It may be noted, however, that the FTC action so far is only a request for information, and is no indication that the company is guilty of any wrongdoing.

Analysts differ on the impact of the FTC investigation, but it is likely that the company may, at the end of it, get away with a simple rap on the knuckles such as a financial penalty, according to Bloomberg.

Meanwhile, the stock could likely move within a range during the pendency of the FTC probe. It closed at $57.15, down nearly 3%, last Friday.

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