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Herbalife Beat, Guidance Raise Not Enough To Get SunTrust Off The Sidelines

Herbalife Beat, Guidance Raise Not Enough To Get SunTrust Off The Sidelines - Herbalife LTD. NYSE:HLF

SunTrust kept its Neutral rating on Herbalife Ltd. HLF shares unchanged despite a beat and raise quarter from the nutrition company.

"[W]e remain Neutral on the name given (1) valuation at >14x 2016E EPS (10-16x historical) and (2) the potential for choppiness/hiccups as it implements new distributor processes/regulations post-FTC settlement," analyst Michael Swartz wrote in a note.

Driven by strong volumes, Herbalife reported better-than-expected second-quarter adj. EPS of $1.29 (vs. SunTrust/Street estimates of $1.17/$1.21) on revenue of $1.2 billion, in line with both SunTrust and the Street.

Related Link: Herb Greenberg Isn't Buying Herbalife's Optimism: "They Have A Broken Business Model"

Post-FTC settlement, the company will begin rolling out new tools to distributors in order to enable better tracking of retail consumption/sales. Herbalife expects one-time implementation costs to run $35 million–$50 million with on-going investments of $5 million–$10 million annually.

Herbalife also raised its 2016 outlook including EPS of $4.50–$4.80 from $4.40–$4.75 and volume growth of 4.5–7.5 percent (vs. +2–5 percent). Total revenue growth was maintained at 1.5–4.5 percent due to currency headwinds.

Swartz also increased his 2016/2017 EPS estimates to $4.75 and $5.35, respectively from $4.68 and $5.25.

The analyst maintained his $66 price target, while the stock is currently up 0.54 percent to $67.40.

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DateFirmActionFromTo
Apr 2016BarclaysTerminatesOverweightOve
Aug 2015Pivotal ResearchMaintainsBuy
May 2015Canaccord GenuityMaintainsBuy

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