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Herbalife Beats, Guides Higher, But...
On the surface, Herbalife's numbers were great. The company reported EPS of $1.27 on expectations of a $1.06 print. The company also boosted its EPS forecast for the full year from a range of $4.45-$4.60 to $4.60-$4.80, putting the Wall Street forecast of $4.66 plainly in the achievable zone. Finally, HLF reported $137MM in cash from operations (compared to $120MM a year ago), which net of CapEx of $24.8MM means Free Cash Flow by that definition of $112.7MM, above the $96MM reported a year earlier. And yet, not even all the cash generated from operations was enough for HLF to fund just its stock buyback in the quarter which amounted to $164.5 million resulting in the Diluted share count plunging from 122.4 million to 108 million.
So far so good. There is, however, a "yes but...."
In the "yes but" category, on one hand we notice first of all that growth rates are slowing down.
On the other, the implied tax rate was 27.3% in the quarter, compared to 29.2% in the prior quarter.
But most disturbing was the third hand and that the company decided to pro forma out of Net Income the following two items:
- Venezuela devaluation impact, which accounted for $10.5 million in net income addbacks, or $0.10 EPS, and
- Expenses incurred responding to attacks on the Company's business model, accounting for $8 million in net income addbacks and $0.07 EPS
HLF spent $8 million to defend itself against Ackman? Really? It is an accepted non-GAAP addback to exclude costs used to fund a mudslinging campaign? Which law firm was charging tens of thousands of dollars per hour to script the CEO and to make the anti-Ackman website we wonder.
Said otherwise had the company used the last quarter's tax rate, and not excluded these items, its EPS would have been right on top of expectations if not under. And of course, had the company not bought back as many shares as it did this quarter, EPS would have been a miss. Perhaps this explains the swing in the stock after hours from up 2% to red now.
Now the focus shifts to the earnings call, where much more will be discussed on the company's distributor network.
Of course, the Icahn put here is rather paradoxical: the billionaire investor will never admit defeat even in light of a seemingly deteriorating business model, and the more the stock drops, the higher the probability that he will either continue to buy the stock in the open market, or tender outright, just so he doesn't lose out to Ackman.
May the billionaire with the most free time on their hands (and highest ATM balance win).
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While all these companies crap out in the US, they are kicking ass and taking nanes in India.I see Independent Herbalif Distributor cars, with that garish stickering all over the place here in Bangalore.
They have a huge office in the most expensive real estate here ( which is expensive by any global standards).
I think companies are imploding on purpose in the US, so they can lay off people easily and treansfer more capital abroad.
ori
I don't doubt that the company's "business model" has attracted a lot of aspiring Indians to the game (i.e. buying their starter kits), but it's a stretch to believe that expensive weight control and vitamin supplements are going to go far in India when the vast majority of people do not have adequate nutrition. Ponzi schemes always need new stooges, and I guess India in next on Herbalife's priority list.
Let me know when Icahn starts paying for new HLF "distributors."
Can I buy soap from these people...ass soap
WTF? Gold is back above $1500. Surely that deserves a snarky ZH headline, AMIRITE, folks?
maybe no headline because gold is not above $1500 today
Damn. I forgot that gold isn't the same as platinum.
HERBA-LIFE, where is the other L? It is time to come clean.
Whose turn is it to talk MDB off the ledge?
I hope Ichan rides this ponzi-scheme company right to $0.00 - it's proper valuation.
HLF is practically a metaphor for the entire market.
Its ponziness is now irrelevant thanks to a funny-money pissing match.
I just love the "yes but". Always brings out the real truth.
Please please please would that wanker Icahn spend all his money in a desparate attempt to seem relevent and important. Cunt.
Herbalife beats meat.
Just proves the old adage "A sucker born every minute."
Hell I did tech for a scAmWay event a couple of weeks ago, didn't think anybody would fall for that $#!+ anymore, but they brought them in by the BUSLOAD!
I think the real issue with HLF is not so much that it's a giant multilevel marketing pyramid (which it clearly is), promoted by truly odious beings who have no idea about real creativity or wealth generation (you know who they are, and I'm happy to go on record stating just how repulsive and corrosive their being is), selling products that are medically proven to do nothing and have no benefit barring placebo (which is the scientific analysis of their product), but the following:
The way that this organization multiplies is by mimetic spread, consuming people's social networks as the only way they can ever hope to make money; it makes zombies out of its lower tiers, and ruins them as social beings. Monetizing every single organic network connection you have is a parasitical model, and partly why pyramid schemes are banned. And so, it isn't Capitalist because, although it does feed off greed and then fear once suckers have bought in, and are stuck with product and desperation is masked by sweaty fervor, it actually works like a virus, and you cannot profit by selling the product alone. Ever.
Any sane society would instantly recognize this and remove it from the body populace as detrimental to the health of its members (even if you have to delineate that as the innocent members who haven't signed up but are impacted by it). Fucking outrageous, this is 101 psych warfare stuff, and it should be treated as an offensive weapon; it's not clever, it's not smart, and worse still, you're not the first to model this type of effect (go ask the CIA).
It isn't done in healthy societies for the same reason people don't make fucking biological weapons, not because it's hard or novel or new, but because it's fucking lethal to society.
Scum.
And yes, I'm totally serious.
You have hit the nail on the proverbial head here - and couldn't agree more. My son got sucked into another organization pretty much like Herbalife. This one is ACN - the one Donald Trump does ad spots for.
These are the ultimate parasite organizations, filled with empty headed zombies who think their going to be millionaires in the next couple years. Unbelievable!
With age, I've grown to understand that predators must exist, for a healthy balance, and all the differing levels of ecological niches in between.
Parasites are a different matter entirely. (And no, ZH, this isn't a silent dog whistle for "ze joos", my thoughts are broader).
"With age, I've grown to understand that predators must exist, for a healthy balance, and all the differing levels of ecological niches in between."
Correct. Wolves have to eat too.
I was drawn by the dog whistle ;-)
Oh... I'm not a vegan.
"You've heard of animals chewing off a leg to escape a trap? There's an animal kind of trick. A human would remain in the trap, endure the pain, feigning death that he might kill the trapper and remove a threat to his kind."
I can quite honestly say, "been there, done that".
@ Lone DeRanger - if your son is infected, then your best bet is probably to show him exactly how many times Trump has failed, mock the comb-over and ridicule the entire setup. Scotland, golf courses and Trump is a rich vein of material. The problem is, as ever, prevention is easier than a cure. I hope he wises up before he blows too much cash, but more importantly, burns too many organic connections.
"You've heard of animals chewing off a leg to escape a trap? There's an animal kind of trick. A human would remain in the trap, endure the pain, feigning death that he might kill the trapper and remove a threat to his kind."
We share something in common ;-)
I got conned into attending one of their pitches.....fucking unreal.....they were going on about some phone that displayed images like it was something really new.....maybe in Nigeria or Kenya.
Has HLF ever come clean on how many units are actually sold through to an actual consumer and not just put into inventory by some new fool added to the distribution network?
It really is an amazing thing to see in action. They pull in a bunch of marks and insist they wear "business casual" clothing. While everyone is coming in the room, they play deep bass "pump up the jams" music, lots of flashing lights, and then it begins with "a word from the president of"...fill in the name of an MLM here.
By the end the marks are falling over themselves to become part of this "great investment"
For the religious WATCH OUT!! There are Christian themed scams as well.
Many moons ago a guy tried to recruit me into his MLM insurance scheme. I kept asking the guy, "So, exactly how does this company make money?" His best response was something to the effect of, "This is a publicly traded company. All of this stuff is for real!" The life insurance the company sold was a terrible deal, he attempted to get me to surrender the contact information of everyone I knew, and work purely on commission. At further insult, I was expect to PAY $90.00 just to attend their "seminar".
I told him to take his ponzi scheme and go fuck himself. Even at 19, before I had an initiation in economics, I knew better.
I smell an ENRON
Time out. I buy Herbalife milk shakes because the taste good and helped me lose 15% weight. It tastes better than anything on the market. I hate the fact that it has to be sold through Multi-Level Marketing since I would buy it a the retail store if it were available.
I would become a distributor only to get a discount to sell to my self, not to make money! Most distributors I know are in that category. Therefore Ackman's accusation of Ponzi Scheme is way off. The people at the bottom of the Pyramid consume a real product, they aren't completely robbed like Madoff. I pay $80 a month for Hebalife shakes without the distributor discount, I pay about the same for retail GNC products that taste worse.
Who knows where the market is going, but I think Dan Loeb (whom Kyle Bass admires) has the edge on this trade. I'm not saying Herbalife is a buy, but I wouldn't short it like Chanos shorted Enron.
What Ackman fails to realize is the Pyramid scheme actually reduces the problem and expense of retail stores and actually having to pay salaries, benefits, minimum wage and all the other headaches of running a traditional business in the Obama Nation....
Or maybe Ackman really has figured this out by now and is just hoping he can do enough trash talking to get out of a short squeeze...
Chanos, Hugh Hendry, and Kyle Bass are far better at the short selling game than Ackman...