Herbalife Raises Annual Forecast Amid Ackman-Icahn Spat
Herbalife Ltd. (HLF), the nutrition company at the center of a battle between hedge-fund managers Bill Ackman and Carl Icahn, raised its 2013 earnings forecast as first-quarter profit topped analysts’ estimates.
Profit this year will rise to as much as $4.80 a share, up from a previous forecast of $4.65, the Cayman Islands-based company said in a statement yesterday. Excluding some items, first-quarter profit was $1.27 a share, topping analysts’ projections of $1.06, the average of seven estimates compiled by Bloomberg.
Herbalife has fought accusations from Ackman, founder of New York hedge fund Pershing Square Capital Management LP, that it is a pyramid scheme. The company has repeatedly denied the allegations, saying it derives its profits from the sale of unique products. Shareholders have added two directors associated with Icahn, who has come to Herbalife’s defense.
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“Not only did they beat on earnings but they beat them substantially and they guided up for the year,” David Simon, chief executive officer of New York hedge fund Twin Capital Management LLC, said today in an interview. “This is a growth company growing over 15 percent a year. People like the product, people are buying the product.”
Twin Capital has a long position in Herbalife, Simon said, declining to disclose the amount of shares held.
Herbalife shares rose 2.5 percent to $39.71 at the close in New York. They’ve advanced 21 percent this year, compared with a 12 percent gain for the Standard & Poor’s 500 Index.
Net income increased 9.9 percent to $118.9 million, or $1.10 a share, from a year earlier, the company said.
Fluctuating currencies will hurt per-share earnings in the last three quarters of the year by 7 cents, Chief Financial Officer John Desimone said in an interview yesterday.
Worldwide net sales rose 17 percent to $1.12 billion, according to the statement. Analysts estimated $1.09 billion. Sales volume was helped by a 33 percent jump in South and Central America.
“Another blowout quarter,” Tim Ramey, an analyst with D.A. Davidson & Co. in Lake Oswego, Oregon, said yesterday in a note. Herbalife generated “solid growth across all segments,” he said. Ramey has a buy rating on the shares.
Herbalife also disclosed during a conference call that it abandoned plans for a new debt arrangement when its independent auditor KPMG LLP resigned in early April after saying a partner leaked inside information. The financing was to be used to repurchase a “meaningful amount of company stock,” Desimone said during the call.
The hiring of a new auditor, being overseen by the board’s audit committee, “has been moving quickly and is nearing completion,” Desimone also said.
Icahn has a stake of 15.9 percent in Herbalife, according to data compiled by Bloomberg, and has said he’ll seek talks with the company about strategic alternatives, including taking it private.
His stake pits him against Ackman, who has sold short 20 million shares of Herbalife after conducting research that convinced him the company was operating a pyramid scheme and that regulators should shut it down.
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