Herbalife Surges Most in Year After Raising Profit Forecast

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Herbalife Ltd., the nutrition company battling hedge fund manager Bill Ackman, climbed after posting second-quarter profit that beat analysts’ estimates and raising its forecast for the year, helped by sales gains in China.

Profit was $1.24 a share, excluding some items, the Los Angeles-based company said Wednesday in a statement. Analysts estimated $1.11, on average.

Herbalife has been fighting Ackman since December 2012, when the billionaire accused it of running an illegal pyramid scheme and announced a $1 billion bet against its stock. The company has repeatedly denied his accusations, but the criticism has prompted probes by U.S. regulators and law enforcement. Meanwhile, the company has continued its expansion abroad, with a particular focus on China. Sales there rose 39 percent to $236.7 million in the quarter.

“The second quarter continued the improving trends we saw in the previous quarter in terms of sales volumes and key sales leader metrics,” Chief Executive Officer Michael Johnson said in the statement. “We believe we will see these positive trends continue through the second half of the year.”

The shares jumped 17 percent to $57.56 at the close on Thursday in New York, the biggest gain since July 22, 2014. Herbalife already had advanced 30 percent this year through Wednesday’s close.

Earnings this year will be $4.50 to $4.70 a share, up from a previous forecast of $4.30 to $4.60, the company said.

Second-quarter sales fell 11 percent to $1.16 billion, the third straight drop. Still, that was better than the $1.15 billion analysts projected. Excluding changes in the value of currencies, revenue gained 1 percent.

Ackman Allegations

Ackman says Herbalife is a pyramid scheme that generates more of its sales from recruiting distributors than from selling products to the public. He’s also criticized Herbalife for targeting the poor.

Fellow billionaire investor Carl Icahn has taken Herbalife’s side in the dispute, accumulating an 18 percent stake in the company to become its largest investor. Post Holdings Inc. Chairman Bill Stiritz and George Soros’s investment firm also have bought shares of Herbalife amid the conflict.

Herbalife has vigorously defended itself, including by creating its own website to attack Ackman.


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