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Nu Skin (NUS) Q1 Earnings Beat, Sales Miss, View Intact

After reporting negative earnings surprise of 1.3% in the fourth quarter of 2016, Nu Skin Enterprises, Inc. NUS delivered positive earnings surprise in the first quarter of 2017. The company posted adjusted earnings of 51 cents per share that outpaced the Zacks Consensus Estimate of 49 cents and improved 21.4% from 42 cents earned in the prior-year quarter.

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

 

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

On excluding the Japan customs charge, the earnings per share grew 21% year over year to 51 cents.

Despite earnings beat, Nu Skin’s shares declined 3.8% during the after-market trading hours, as investors remained skeptical about the company’s top-line performance that fell short of expectations for the second straight quarter. Nevertheless, we note that this Zacks Rank #2 (Buy) stock surged 49.1% over the past one year against the Zacks categorized Cosmetics & Toiletries industry’s loss of 20%.

Quarter in Detail

Revenues of $499.1 million in the first quarter rose 5.8% year over year but came below the Zacks Consensus Estimate of $503.3 million. The upside was driven by solid sales of the ageLOC Me and ageLOC Youth products coupled with social selling endeavors. In addition, results gained from robust growth witnessed at the Mainland China, South Asia/Pacific and EMEA regions. On a constant-currency basis, revenues increased 6.6% from the prior-year quarter.

The company’s sales leaders recorded a year-over-year decline of 1% to 54,600, its customers increased 2% to 9,80,000 from the prior-year quarter.

Region wise, revenues witnessed growth of 26.4% to $150 million in Mainland China, 9.8% to $69.8 million in South Asia/Pacific and 4.5% to $34.1 million in EMEA. However, revenues declined 4.2% to $82.5 million in South Korea, 0.1% to $65.7 million in Americas, 6% to $61.2 million in Japan and 10.3% to $35.9 million in Hong Kong/Taiwan.

On a constant-currency basis, revenues grew 33.1% in Mainland China, 11% in South Asia/Pacific and 6.6% in EMEA. However, the same fell 8.2% in South Korea, 0.4% in Americas, 7.3% in Japan and 13.4% in Hong Kong/Taiwan.

The company's adjusted gross profit grew 6.2% to $387.8 million in the quarter. Also, gross margin inflated 30 basis points (bps) to 77.7%.

Further, adjusted operating income jumped 17.2% to $46.3 million and operating margin expanded 90 bps to 9.3% in the quarter.



Other Financial Details

Nu Skin ended the quarter with cash and cash equivalents of $335.6 million, and total liabilities and stockholders' equity of $1,494.4 million.

During the quarter, the company repurchased shares worth $6.8 million, with an outstanding authorization of $192.9 million.

Additionally, it paid $19 million as dividends in the quarter. Concurrent to the earnings release, management declared a quarterly dividend of 36 cents a share payable on Jun 14 to shareholders of record as on May 26.

Guidance

Management remains impressed with its quarterly performance. Moving ahead, the company remains focused on innovations, programs as well as boosting its customers and sales leaders. Nu Skin also plans to launch its ageLOC LumiSpa product in the fourth quarter that is expected to generate roughly $100 million in revenues.

Nu Skin reiterated its guidance for 2017. Management continues to expect revenues of $2.26–$2.30 billion with an unfavorable currency impact of roughly 2–3%. Furthermore, earnings per share for 2017 are projected in the band of $3.10–$3.25. The Zacks Consensus Estimate for 2017 is currently pegged at $3.10.

For the second quarter, revenues are anticipated in the range of $530–$550 million including a negative currency impact of 1–2%. Moreover, earnings are estimated in the band of 65–70 cents per share. The Zacks Consensus Estimate is currently pegged higher at 85 cents.

Stocks You May Consider

Other stocks worth considering in the broader Consumer Staples sector include Inter Parfums, Inc. IPAR, Blue Buffalo Pet Products BUFF and Energizer Holdings, Inc. ENR, all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inter Parfums increased 22% over the past one year. Further, it posted an average earnings beat of 7.4% in the trailing four quarters.

Blue Buffalo Pet Products has a long-term earnings growth rate of 17.5%. Moreover, it posted an average earnings beat of 6.8% in the trailing four quarters.

Energizer, with a long-term earnings growth rate of 9.8% has surged 29.9% in the past one year.

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