Herbalife surprised Wall Street on Thursday, reporting earnings that beat both consensus estimates and the company’s own projections. But the overall guidance for 2015 disclosed by Herbalife seemed to disappoint investors on Wall Street, where the Herbalife war rages on.
On the surface, Herbalife’s earnings beat was something of a victory for the company. After consistently beating expectations for years, Herbalife had disappointed investors and been unable to meet Wall Street’s earnings expectations in the second and third quarter of 2014 as the company made adjustments amid investigations from federal regulators.
The diet-shake seller reported that it earned $121 million on an adjusted basis in the fourth quarter, or 1.41 per share. The consensus estimate on Wall Street had called for the company to post $1.16 per share, less than the $1.30 to $1.40 per share the company had projected. Herbalife’s fourth quarter earnings were up 10% from the same period in 2013, when the company earned $1.28 per share, arresting the 2014 earnings decline.
Billionaire hedge fund manager William Ackman has waged a multi-year battle against Herbalife, calling it a pyramid scheme that will collapse. While the company is still very much in business, generating $1.1 billion in revenue in the fourth quarter, Ackman’s public criticisms have sparked federal regulators to investigate Herbalife and caused the company to change the way it does business. Herbalife’s revenue declined by 11% in the fourth quarter of 2014.
Shares of Herbalife bounced around in after-hours trading, but were down by about 1 % as the company’s conference call got going. Shares of the company crashed in 2014 and have started 2015 down as well. The company has some prominent shareholders, like Carl Icahn, the company’s biggest shareholder, and George Soros, who in the fourth quarter increased his stake in the company to 3.4 million shares.
Still, it seems like the momentum remains on the side of Ackman’s Pershing Square hedge fund, which is massively shorting Herbalife’s stock. Herbalife on Thursday updated its guidance and now expects net sales to fall between 6% and 9% in 2015. Herblife has adopted a new sales program called the “Gold Standard” initiative, which seems less aggressive than past practices and has appeared to have dented sales. The company’s new compensation plan initiatives appear to have decreased new distributor sales while currency issues in overseas markets like Venezuela have impacted revenue. The company blamed its revenue decrease in the fourth quarter on “an unfavorable impact from currency.”
In a statement, Herbalife CEO Michael Johnson said: “We continue to implement changes that we believe will create a stronger company with the ideal combination of growth and sustainability.”
The Herbalife circus will go on. It continued on the streets of Manhattan on Thursday as a small group of Herbalife critics protested outside the office building where Icahn works. Those protesters were met by a group of Herbalife supporters.
