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Nu Skin (NUS) Reports In-Line Q3 Earnings, Trims Guidance

Nu Skin Enterprises, Inc. NUS posted third-quarter 2017 results, wherein earnings were in line with the Zacks Consensus Estimate. However, the top and the bottom line declined year over year due to lower sales leaders and weak performance in the regions of South Korea, Japan and Hong Kong/Taiwan. As a result, management trimmed guidance for 2017.

This led to negative sentiment among investors, as Nu Skin’s shares dipped 1.4% during after-market trading hours on Nov 1. However, the Zacks Rank #3 (Hold) stock has outperformed the industry in the past three months owing to its consistent efforts to improve performance through product launches. Nu Skin’s shares have returned 4.1% as against the industry’s 2.6% decline.

Q3 Highlights

The company posted earnings of 76 cents per share which met the higher end of management’s previous outlook of 74-76 cents. However, earnings slumped 22.4% from the prior-year period, due to lower revenues and margins. A higher tax rate negatively impacted the quarter’s performance.

 

Revenues of $563.7 million in the third quarter were almost in line with the Zacks Consensus Estimate of $564 million, but slipped 6.7% from the prior-year quarter. On a constant-currency basis, revenues dropped 5.8%. Dismal performance from the Hong Kong/Taiwan, Japan and South Korea regions dragged overall revenues of Nu Skin.

Also the prior-year results benefited from LTOs (limited-time-offer) which increased the number of sales leaders. This trend was absent during the quarter under review, which impacted the year-over-year comparison. Further, foreign currency affected revenues by 1% during the quarter.

The company’s sales leaders recorded a year-over-year decline of 4.6% to 64,200, due to the absence of prior-year’s LTOs. On the other hand, Nu Skin’s customer base increased 7% to 1,069,000 from the prior-year quarter.

The company's gross profit declined 7.4% to $442.9 million, with the gross margin shrinking 60 basis points (bps) to 78.6%.

Further, operating income plunged 21.8% to $64.3 million and operating margin decreased 220 bps to 11.4%.

Nu Skin Enterprises, Inc. Price, Consensus and EPS Surprise

Regional Results

Region wise, revenues declined 34.5% to $89.2 million in South Korea, 13.8% to $62.5 million in Japan and 14.7% to $41.1 million in Hong Kong/Taiwan. These downsides were partially compensated by an increase of 2.5% to $172.6 million in Mainland China, 11.2% to $79.2 million in Americas, 11.5% to $79.1 million in South Asia/Pacific and 8.7% to $40.1 million in EMEA.

On a constant-currency basis, revenues grew 2.5%, 12.1%, 12.9% and 3.2% in Mainland China, Americas, South Asia/Pacific and the EMEA region, respectively. However, the same declined 33.7% in South Korea, 6.5% in Japan and 16.4% in Hong Kong/Taiwan.

Other Financial Details

Nu Skin ended the quarter with cash and cash equivalents of $363.8 million and total liabilities and stockholders' equity of $1,547.3 million.

During the quarter, the company repurchased shares worth $26 million with an outstanding authorization of $152 million.

Additionally, the company paid $19 million as dividends in the quarter. Concurrent to the earnings release, management declared a quarterly dividend of 36 cents payable on Dec 6, to its shareholders of record as of Nov 17.

Guidance

The company remains focused on boosting its customers and sales leaders. In October, during the Nu Skin LIVE! Event, the company had announced plans to launch several new products and sales programs to operate more efficiently.

For fiscal 2017, management slightly trimmed revenues and earnings view. The company now expects revenues in the band of $2.26-$2.28 billion, compared with the earlier projection of $2.26-$2.30 billion. The revised guidance reflects year-on-year growth of approximately 3%. Also, earnings per share are now projected in the band of $3.20-$3.25 compared with the previous range of $3.20-$3.30. The Zacks Consensus Estimate for 2017 is currently pegged at $3.24.

For the fourth quarter, management anticipates revenues in the range of $650-$670 million including a negative currency impact of 1%. The company expects benefits of $100 million in revenues, stemming from the introduction of ageLOC LumiSpa. The Zacks Consensus Estimate of revenues is currently pegged at $703.5 million, considerably higher than management’s anticipation.

Further, management expects earnings for the upcoming quarter in the band of $1.16-$1.21 per share. The Zacks Consensus Estimate is currently pegged at the higher end of management’s guidance.

Looking For Consumer Staple Stocks? Check These

Investors interested in the same sector may consider stocks such as McCormick & Company, Inc MKC, Constellation Brands, Inc STZ and Inter Parfums Inc IPAR. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

McCormick delivered an average positive earnings surprise of 4.1% in the trailing four quarters. It has a long-term earnings growth rate of 9.4%.

Constellation Brands pulled off an average positive earnings surprise of 13.6% in the trailing four quarters. It has a long-term earnings growth rate of 14.8%.

Inter Parfums delivered an average positive earnings surprise of 18.1% in the trailing four quarters. It has a long-term earnings growth rate of 12.3%.

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