Shareholders in Herbalife Ltd. (NYSE:HLF) had a terrible week, as shares crashed 33% to US$8.07 in the week since its latest full-year results. Revenues were in line with forecasts, at US$5.1b, although statutory earnings per share came in 16% below what the analysts expected, at US$1.42 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following last week's earnings report, Herbalife's five analysts are forecasting 2024 revenues to be US$5.09b, approximately in line with the last 12 months. Per-share earnings are expected to soar 43% to US$2.05. In the lead-up to this report, the analysts had been modelling revenues of US$5.14b and earnings per share (EPS) of US$3.07 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
It might be a surprise to learn that the consensus price target fell 21% to US$13.60, with the analysts clearly linking lower forecast earnings to the performance of the stock price. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Herbalife, with the most bullish analyst valuing it at US$19.00 and the most bearish at US$10.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Herbalife's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 0.5% growth on an annualised basis. This is compared to a historical growth rate of 1.3% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.1% annually. Factoring in the forecast slowdown in growth, it seems obvious that Herbalife is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Herbalife's revenue is expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Herbalife analysts - going out to 2025, and you can see them free on our platform here.
Even so, be aware that Herbalife is showing 4 warning signs in our investment analysis , and 2 of those are concerning...
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