Nu Skin (NUS) Tops Q2 Earnings And Sales, Currency A Woe

Nu Skin Enterprises, Inc. (NYSE:NUS) posted second-quarter fiscal 2017 results, wherein both earnings and sales surpassed the Zacks Consensus Estimate. However, Nu Skin’s shares have declined 3.4% during the after-market trading hours.

The company posted adjusted earnings of 77 cents per share that outpaced the Zacks Consensus Estimate of 70 cents and was also ahead of the management’s outlook of 65–70 cents. Including the reported quarter, the company’s earnings have surpassed estimates in three out of the trailing five quarters. We also note that this Zacks Rank #2 (Buy) stock increased 15.8% over the past one year against the industry’s decline of 15%.

Despite a gain of 4 cents from lower-than expected tax rate, second-quarter earnings declined 2.5% from 79 cents in the year-ago period. The decline can be attributed to lower year-over-year sales and contracting margins.

Quarter Highlights

Revenues of $550.1 million in the second quarter marginally came ahead of the Zacks Consensus Estimate of $546.8 million but declined 8.4% from the prior-year sales. Revenues during the quarter declined 2% due to foreign currency fluctuations. On a constant-currency basis, revenues declined 6.8%. Dismal performance from the Mainland China, South Asia/Pacific, Hong Kong/Taiwan, Japan and South Korea regions had pulled down the overall revenues of Nu Skin.

The company’s sales leaders recorded a year-over-year decline of 10.9% to 58,900, while its customers increased 4.7% to 1,060,000 from the prior-year quarter.

The company's gross profit declined 9.2% to $428.6 million in the quarter. Also, gross margin decreased 80 basis points (bps) to 77.9%.

Further, operating income declined 18.9% to $64.7 million and operating margin decreased 150 bps to 11.8% in the quarter.

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

Regional Results

Region wise, revenues witnessed decline of 6.6% to $172 million in Mainland China, 26.4% to $67.9 million in South Asia/Pacific, 11.1% to $64.7 million in Japan, 17.8% to $43 million in Hong Kong/Taiwan and 6.6% to $86.9 million in South Korea.

However, revenues increased 13.6% to $77 million in Americas and 1.3% to $38.2 million in EMEA. The revenue growth in these regions was however not enough to offset the decline witnessed in other regions.

On a constant-currency basis, revenues grew 15% in Americas and 2.6% in EMEA. However, the same fell 1.9% in Mainland China, 9.2% in South Korea, 24.7% in South Asia/Pacific, 8.4% in Japan and 20.7% in Hong Kong/Taiwan.

Other Financial Details

Nu Skin ended the quarter with cash and cash equivalents of $345.1 million, and total liabilities and stockholders' equity of $1,507.1 million.

During the quarter, the company repurchased shares worth $15.3 million, with an outstanding authorization of $177.6 million.

Additionally, it paid $19.1 million as dividends in the quarter. Concurrent to the earnings release, management declared a quarterly dividend of 36 cents a share payable on Sep 13 to shareholders of record as on Aug 25.

Guidance

Moving ahead, the company remains focused on boosting its customers and sales leaders. Nu Skin also plans to launch its ageLOC LumiSpa product in the fourth quarter this year, which is expected to generate roughly $100 million in revenues.

For the fiscal year 2017, management continues to expect revenues of $2.26–$2.30 billion with an unfavorable currency impact of roughly 2–3%. Nevertheless, it raised its guidance for full year earnings. Earnings per share are now projected in the band of $3.20–$3.30. The Zacks Consensus Estimate for 2017 is currently pegged lower at $3.07.

For the second quarter, revenues are anticipated in the range of $540–$560 million including a negative currency impact of 2%. Moreover, earnings are estimated in the band of 71–76 cents per share. The Zacks Consensus Estimate is currently pegged higher at $1.00.

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Investors may also consider other stocks from the same sector such as Inter Parfums, Inc. (NASDAQ:IPAR) , Kellogg Company (NYSE:K) and Constellation Brands, Inc. (NYSE:STZ) all carrying a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inter Parfums has an average positive earnings surprise of 15.6% over the past four quarters. It has a long-term earnings growth rate of 12.3%.

Kellogg Company has an average positive earnings surprise of 6.2% over the past four quarters. It has a long-term earnings growth rate of 6%.

Constellation Brands has an average positive earnings surprise of 11.7% over the past four quarters. It has a long-term earnings growth rate of 18.2%.

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