Canaccord Genuity on Consumer & Retail: Direct Selling Preview: Some Momentum, Some Currency and Some Questions - A Range-Bound Group in Q4
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Canaccord Genuity on Consumer & Retail (Health, Wellness and Lifestyle) Direct Selling Preview: Some momentum, some currency and some questions - A range-bound group in Q4
Analyst, Scott Van Winkle, said, "The direct selling group has been stuck in a range since last summer as investors question the velocity of the earnings momentum for the stocks with the strongest trends and look for answers to fundamental questions across the group. We expect Q4 results will be a replay of the last several quarters with momentum still very apparent at Herbalife (NYSE: HLF)(BUY) and Nu Skin (NYSE: NUS)(BUY). The question for the shares heading into Q4 results is whether the magnitude of the upside and guidance increases will be more modest. We suspect both will post upside, but do anticipate more modest variances and guidance revisions as HLF faces currency pressure and Nu Skin already increased guidance twice during Q4. USANA Health Sciences (Nasdaq: USNA)(HOLD) could again deliver strong EPS growth despite modest sales growth as we see an energized new executive management team focused on earnings growth and offsetting likely challenges in its China transition. Investors will be keenly focused on performance in Hong Kong and perceptions of competitive pressures. For Medifast (NYSE: MED)(HOLD), decelerating growth in its Take Shape for Life direct selling segment should continue while momentum in direct response and the clinic channel support favorable growth. We expect investors to focus on health coach growth, but Q4 isn’t a seasonally strong quarter and thus won’t shed much light. However, we do expect Q4 to illustrate that the consensus earnings forecasts are still too high."
"The trading opportunity this quarter could be investor concerns Herbalife is all about currency these days. The exposure to the euro and a multitude of other currencies that have traded off vs. the dollar is the first and most repeated investor question. It’s a fair concern, but we believe that the currency concerns are overblown (not that we can forecast currency, but we note that that the company has relatively effective hedges and business momentum in every geography). Some Q4 upside, and even a modest guidance increase, could be a favorable outcome given that the euro has weakened incrementally since the company last gave guidance. The other play into investor concerns could be at USANA, where we suspect that the Hong Kong risks have yet to materially impact results; thus some earnings upside could materially reduce investor concerns."
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Analyst, Scott Van Winkle, said, "The direct selling group has been stuck in a range since last summer as investors question the velocity of the earnings momentum for the stocks with the strongest trends and look for answers to fundamental questions across the group. We expect Q4 results will be a replay of the last several quarters with momentum still very apparent at Herbalife (NYSE: HLF)(BUY) and Nu Skin (NYSE: NUS)(BUY). The question for the shares heading into Q4 results is whether the magnitude of the upside and guidance increases will be more modest. We suspect both will post upside, but do anticipate more modest variances and guidance revisions as HLF faces currency pressure and Nu Skin already increased guidance twice during Q4. USANA Health Sciences (Nasdaq: USNA)(HOLD) could again deliver strong EPS growth despite modest sales growth as we see an energized new executive management team focused on earnings growth and offsetting likely challenges in its China transition. Investors will be keenly focused on performance in Hong Kong and perceptions of competitive pressures. For Medifast (NYSE: MED)(HOLD), decelerating growth in its Take Shape for Life direct selling segment should continue while momentum in direct response and the clinic channel support favorable growth. We expect investors to focus on health coach growth, but Q4 isn’t a seasonally strong quarter and thus won’t shed much light. However, we do expect Q4 to illustrate that the consensus earnings forecasts are still too high."
"The trading opportunity this quarter could be investor concerns Herbalife is all about currency these days. The exposure to the euro and a multitude of other currencies that have traded off vs. the dollar is the first and most repeated investor question. It’s a fair concern, but we believe that the currency concerns are overblown (not that we can forecast currency, but we note that that the company has relatively effective hedges and business momentum in every geography). Some Q4 upside, and even a modest guidance increase, could be a favorable outcome given that the euro has weakened incrementally since the company last gave guidance. The other play into investor concerns could be at USANA, where we suspect that the Hong Kong risks have yet to materially impact results; thus some earnings upside could materially reduce investor concerns."
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