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More on Herbalife Q1 results

  • Global volume growth: 9%. EPS: $0.74 (-32.7%).
  • CF Ops: $190.6M (+39%).
  • Q2 guidance:
  • Net sales growth: 10% - 12%, volume growth: 7% - 9%.
  • EPS: $1.51 - $1.55.
  • Common shares to be repurchased: $581M.
  • 2014 guidance:
  • Net sales growth: 10% - 12%, volume growth: 8% - 10%.
  • EPS: $6.10 - $6.30.
  • Quarterly cash dividend terminated. Cash will be used to buy back shares.
  • (HLF +1.8%)
Comments (13)
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    No dividend means it is now cheaper to carry a short position.
    28 Apr, 04:46 PM Reply Like
  • King Rat
    , contributor
    Comments (608) | Send Message
     
    Not cheaper, just more convenient.
    If a trader shorts a $20 stock that pays a $1 dividend, the stock goes to $19 after ex-div.
    The trader then exits the short position with a $1 profit and $1 cash liability (to be paid when dividend is due). It is a wash save for $1 collecting interest until paid.

     

    Stock buyback is actually more dangerous for shorts. Shrinking float and inflated demand for the stock.

     

    HLF is a stock where the vast majority of longs and shorts do not really know why they are long or short. It is very entertaining to watch though.
    28 Apr, 04:57 PM Reply Like
  • webkowuite
    , contributor
    Comments (24) | Send Message
     
    Happy days!
    28 Apr, 04:53 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    "Common shares to be repurchased: $581M."

     

    No, $255m has been spent already, and they spent it buying shares from their own executives (smart, huh?) Only $326m is left for repurchases.
    28 Apr, 05:00 PM Reply Like
  • intra
    , contributor
    Comments (46) | Send Message
     
    @Andrei

     

    Where will the change in insiders' shares show up if the co is purchasing shares under 10b-5 plan? Thanks.
    28 Apr, 05:03 PM Reply Like
  • Dampflok
    , contributor
    Comments (807) | Send Message
     
    intra, you have to look at the share ownership of the insiders in the annual report.
    28 Apr, 06:26 PM Reply Like
  • intra
    , contributor
    Comments (46) | Send Message
     
    @Dampflok

     

    What I'm curious about is that HLF will spend a total of $315mm repurchasing under the 10b5-1 plan in April alone. My understanding of 10b5-1 plans is that insiders have set up a schedule of purchases or sales of shares (HLF executives sell into the buyback as stated in the PR). Also, the acquisition or disposition must still be filed, right? Further, when I look at the ownership of the top executives such as MOJ, Rich G., Rob Levy, Des W., etc., they all own a total of ~$75mm shares. Icahn has 17mm shares valued at around $1 billion.

     

    The $315mm figure could also include other insiders to sell, i.e. funds and other directors; but just looking at the impact in 1 month, when and where will we see disclosures noting the change in position of shares? Surely we don't have to wait for the 2014 10K. $315mm is a lot of shares (5.25 million @ $60/share). MOJ only owns around 850k.

     

    Thanks.
    30 Apr, 01:05 PM Reply Like
  • rambler1
    , contributor
    Comments (409) | Send Message
     
    Ackman has a large portion of his short in options. Elimination of dividends to buyback stock just says lets screw Ackman as much as possible.
    28 Apr, 05:24 PM Reply Like
  • Nate Acreman
    , contributor
    Comments (83) | Send Message
     
    I disagree with it being for the sole purpose of screwing over Ackman, although I am sure any anguish caused to Ackman would be a much loved bi-product.

     

    Most analysts have been saying for awhile that they suspected Herbalife would begin to buy back as much stock as it can. A few have even suggested that Icahn would push Herbalife to go private. The buy back is just a means for Herbalife to protect itself and prevent the stock price from ever dropping to zero barring being forced to shut down. Halting the dividends is just a means for them to pay for it.
    28 Apr, 06:22 PM Reply Like
  • Dampflok
    , contributor
    Comments (807) | Send Message
     
    Nate, the buy-back will not protect the stock from going down to zero, unless all stock is bought, i.e. the co. is going private. Otherwise the price of any remaining stock will aways depend on what a buyer is willing to pay for it. Fact is that HLF under the buy-back is mostly helping executives to cash in their holdings without having to offer their stock in the market. In other words, the directors are cashing in and disconnect their personal fortunes from the fate of Herbalife already.The joke is, the money that was borrowed for the buy-back came from the sale of convertible bonds, i.e. debt that is convertible into stock again. If you really want to go private you have to retire that debt also!
    28 Apr, 06:33 PM Reply Like
  • Nate Acreman
    , contributor
    Comments (83) | Send Message
     
    I think saying that executives are the ones selling the stock is a bit presumptuous. I do believe that this is a means for the company to protect itself. I will concede the point I made about preventing stock from going to zero, as I was clearly wrong. It does however keep stock prices up.
    28 Apr, 08:32 PM Reply Like
  • shakazoid
    , contributor
    Comments (148) | Send Message
     
    Here's a good perspective on this http://bv.ms/1m3m32h on bloomberg.
    "Or another comparison: Net income over the past 15 months totals about $650 million; cash flow from operations was a little under $1 billion. Throw in the $297.4 million that Herbalife spent on share repurchase last year, and you get over $1.3 billion of share repurchases and related transactions in the last 16 months, well ahead of operating cash flow and more than double net income. Herbalife is funneling money to shareholders faster than it can make it."
    28 Apr, 06:38 PM Reply Like
  • june1234
    , contributor
    Comments (2550) | Send Message
     
    Need cash for lawyers
    29 Apr, 08:03 AM Reply Like
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