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Nu Skin (NUS) Beats on Q1 Earnings & Revenues; Ups View

Zacks Equity Research
Updated

Nu Skin Enterprises Inc. NUS reported better-than-expected results in the first quarter of 2016. However, the results were significantly lower than the prior-year due to margin declines. Nevertheless, this skin care and nutritional products retailer raised its outlook for 2016 owing to new product launches and favorable view on currency.

First Quarter Results in Detail

Nu Skin reported adjusted earnings of 42 cents per share in the first quarter of 2016, which declined a significant 30% from 60 cents per share in the year-ago quarter. This was due to lower year-over-year revenues and decline in operating margins. Earnings however beat the Zacks Consensus Estimate of 37 cents and also exceeded the company’s expectation of 35-38 cents per share attributable to better-than-expected revenues.

 

NU Skin Enterprises Inc. - Earnings Surprise | FindTheBest

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Revenues of $471.8 million in the first quarter of 2016 plummeted about 13.2% from the year-ago quarter due to currency headwinds, which negatively impacted sales by 5%, lower than the expected range of 6%-7%.

Revenues, excluding currency impact, declined 8.7% in the first quarter. Except EMEA, the company’s performance declined in Greater China, South Asia/Pacific, Americas and North-Asia regions, on a constant currency basis.

Revenues were however marginally higher than the company’s guided range of $450-$470 million and also beat the Zacks Consensus Estimate of $453 million by 4.2%.

The company's gross and operating margin declined in the first quarter due to weak sales and currency headwinds. Gross margin declined 330 basis points to 77.4%, while operating margin declined 420 basis points to 8.4% in the first quarter of 2016. The company also witnessed higher general and administrative expense ratio in the quarter.

The company anticipates second quarter and 2016 gross margin to normalize and be above 78%.

Other Financial Details

During the quarter, the company paid $19.8 million of dividends and repurchased $20 million worth shares in the quarter, leaving the authorization at $427 million at the end of March.

Second Quarter Guidance

For the second quarter, revenues are expected in a range of $560 million to $580 million, assuming a negative foreign currency impact of approximately 4%. On a constant currency basis, revenues are expected to increase in a range of 6% to 8%, with earnings in the range of 75 – 79 cents per share in the second quarter. The Zacks Consensus Estimate of 81 cents per share is above the guided range.

Also, the company plans to continue to roll out ageLOC Me and ageLOC Youth in the second quarter, with more products in the second half of the year.

In the second quarter, the company will offer limited-time deals of ageLOC Me in Greater China and ageLOC Youth in South Asia, and will launch ageLOC Me on a full-time basis in Japan. 

Full-Year Guidance Raised

For 2016, the company has raised its earnings and revenue guidance owing to better-than-expected first quarter results and expectation of favorable currency impact. The company now expects revenue in a range of $2.16 to $2.20 billion, including a negative foreign currency impact of 4% to 5%. The company had previously forecast revenues in a range of $2.10 billion to $2.15 billion, with currency impact of 6% to 7%. Adjusted earnings are forecast in a range of $2.65 to $2.85 per share, up from the prior guidance range of $2.40 - $2.60 per share. The Zacks Consensus Estimate of $2.50 per share is below the guided range.

Nu Skin currently holds a Zacks Rank #2 (Buy).

Other Stocks to Consider

Some other companies worth considering in the same space include Coty’s, Inc. COTY and Estee Lauder Companies, Inc. EL, which hold the same Zacks Rank like Nu Skin. A better ranked company in the broader consumer staples sector is Campbell Soup Company CPB, sporting a Zacks Rank #1 (Strong Buy).

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NU SKIN ENTERP (NUS): Free Stock Analysis Report
 
ESTEE LAUDER (EL): Free Stock Analysis Report
 
CAMPBELL SOUP (CPB): Free Stock Analysis Report
 
COTY INC-A (COTY): Free Stock Analysis Report
 
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Zacks Investment Research