Nu Skin Enterprises, Inc. (NYSE:NUS) will release fourth-quarter and full-year 2013 results prior to the market opening on Monday, March 3. The Nu Skin management team will host a conference call with the investment community later that same day beginning at 11 a.m. (EST). During the call, participants will hear management discuss past results and upcoming business initiatives.
Wall Street anticipates that the retailer will earn $1.99 per share for the quarter, which is $1.02 more than last year's profit of $0.97 per share. iStock expects NUS to top Wall Street's consensus number. The iEstimate is $2.07; although, anything is possible as we'll explain.
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Nu Skin Enterprises is a global direct selling company with operations in 53 markets worldwide. The Company develops and distributes anti-aging personal care products and nutritional supplements under its Nu Skin and Pharmanex brands.
Monday's announcement will be bigger than most as the company tries to rebound from pyramid scheme allegations. In mid-January, NUS shares tumbled over a cliff, falling from $136.47 to $77.39 in a matter of days. On January 15th, China's state-run People's Daily alleged that Nu Skin is a "suspected illegal pyramid scheme." The next day, China's State Administration for Industry and Commerce announced a probe into the company's operations.
NUS management responded by saying it would continue to sell products through existing distributors in China and extend its refund policy to within 12 months of purchase, minus a 10% restocking fee. Despite staying the course in China, management says the allegations will likely hurt sales.
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Last quarter, mainland China and Hong Kong accounted for $399.1 million in sales, which was 43.02% of total sales for Q3. Year-over-year (YoY), the region's revenue climbed $299 million, or 74.48% of the company's sales growth in Q3 2013 versus Q3 2012. Add in Taiwan and it hikes up to 81.71%.
As investors have learned already and our income statement analysis has proved as China goes, so goes Nu Skin's share price. Now, we have no way ok knowing for sure what the pyramid schemes allegations will mean for Monday's quarterly profit review, but… we did Google Trends for "Nu Skin" in China to see how search volume intensity fared since the news – not so good.
Chinese web queries for Nu Skin has plummeted, falling 55.10% since January. That doesn't necessarily mean sales and earnings for the current quarter will be impacted; however, there is a reasonable chance falling Chinese interest could lead to reduced guidance for Q1 2014 and the full-year.
If that's the case, short-sellers could swarm the stock, and with only 58.19 million shares in the float (stock available for trading), things could get ugly quick.
Overall: there is too much risk, in our opinion, to get in front of Nu Skin Enterprises, Inc.'s (NUS) earnings report. Although, the company's EPS-driven price response suggest a significant swing is coming. Investors could play it both ways with an options straddle.
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