Nu Skin (NUS) Posts In-Line Q2 Earnings; Ups Sales View

Shares of Nu Skin Enterprises Inc. (NYSE:NUS) were up 11% on Aug 5 following the company's second-quarter results. While the company’s earnings matched estimates, revenues beat expectations. Further, this skin care and nutritional products retailer raised its outlook for 2016 owing to new product launches and a favorable view on currency.

Second Quarter Results in Detail

Nu Skin reported adjusted earnings of 79 cents per share in the second quarter of 2016, which increased 5.3% from 75 cents per share in the year-ago quarter. This was due to higher year-over-year revenues and improved operating margins, which offset the currency impact of 36 cents. Earnings were in line with the Zacks Consensus Estimate and also at the higher end of the company’s expectation of 75-79 cents per share attributable to better-than-expected revenues.

Despite currency headwinds, revenues of $600.5 million in the second quarter of 2016 grew 7% from the year-ago quarter, driven by significant product introduction events in South Asia/Pacific and Greater China. The company also witnessed an increase in sales leaders during the quarter, reflecting the impact of product launches.

In April, the company introduced its ageLOC Youth nutritional product in South Asia Pacific, which drove the region’s revenue growth by 42%, on a constant currency basis.

Revenue and Margins

Revenues, excluding currency impact, increased 10% in the second quarter. The company’s performance improved significantly in EMEA, Greater China, and South Asia/Pacific, offsetting the decline in Americas and North-Asia regions, on a constant currency basis.

Revenues were higher than the company’s guided range of $560-$580 million and also beat the Zacks Consensus Estimate of $583 million by 3%.

The company's gross margin declined 160 basis points (bps) to 78.7% in the second quarter due to currency headwinds. Operating margin, on the other hand, improved 50 bps to 13.3% in the second quarter of 2016, owing to lower general and administrative expense ratio in the quarter.

Other Financial Details

During the quarter, the company paid $19.9 million of dividends and repurchased $4.3 million worth shares in the quarter, leaving the authorization at $422.7 million at the end of the quarter.

The company plans to repurchase $210 million of stock during the balance of the year.

Third Quarter Guidance

For the third quarter, revenues are expected in a range of $560 million to $580 million, assuming a negative foreign currency impact of approximately 1-2%. Earnings are expected in the range of 80 – 84 cents per share in the third quarter. The Zacks Consensus Estimate of 83 cents per share is within the guided range.

In the second half of the year, the company intends to focus on the full-time launch of ageLOC Me and its global product initiatives.

Full-Year Guidance Raised

For 2016, the company has raised its revenue guidance owing to better-than-expected second-quarter results and expectation of favorable currency impact. The company now expects revenues in a range of $2.20 to $2.24 billion, including a negative foreign currency impact of 2% to 3%. The company had previously forecast revenues in a range of $2.16 to $2.20 billion, with currency impact of 4% to 5%. Adjusted earnings are forecast in a range of $2.80 to $2.90 per share. The Zacks Consensus Estimate of $2.85 per share is within the guided range.

Nu Skin currently sports a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Some other companies worth considering in the same space include Inter Parfums, Inc. (NASDAQ:IPAR) and Hele of Troy Ltd. (NASDAQ:HELE) . Another company which is well positioned in the broader consumer staples sector is The J. M. Smucker Co. (NYSE:SJM) . While Inter PArfums and Smucker hold the same Zacks Rank as Nu Skin, Hele of Troy carries a Zacks Rank #2 (Buy).