Herbalife (HLF) Falls Despite Bullish Commentary from Canaccord Genuity

Herbalife (NYSE: HLF) is down 3.4% Thursday despite positive comments from Canaccord Genuity analyst Scott Van Winkle in a note to clients earlier. The analyst sees currency impacting estimates again but is raising his price target to $50.00 (from $42.00) on stronger peer valuation.

"The fundamentals will remain pressured by the weight of changes to the marketing plan at a time when currency keeps adding to the pressure," Van Winkle comments. "We still believe that the valuation overly discounts the business and its cash flow and maintain our BUY rating."

The analyst believes Q1 results should provide some clarity on the impact of new initiatives. "Herbalife will report Q1 results after the close on May 5th and the Q1 results, particularly how the quarter closed, should provide better clarity to the impacts of a suite of changes to the company's marketing plan. Volume declines in several key markets are fully expected, but the magnitude of such changes as the full implementation of first order limitations (previously limited to about 18 markets) and debut of a new policy mandating qualifying purchases direct from Herbalife will be the key insights. Only the change from the traditional 5K/12-month qualification."

The firm forecast a 15% revenue decline during Q1 on a 7% volume decline due to currency. "Given the continued decline of the euro and several other currencies, including the Mexican peso, we have reduced our F2015 revenue forecasts by a little over 2.3% to $4.39B from $4.49B," he said. "Our F2015 EPS estimate is reduced to $4.00 from $4.20."

The firm is alos introducing F2016 revenue and EPS estimates of $4.6B and $4.45, which equates to 5% and 11% growth, respectively.

For an analyst ratings summary and ratings history on Herbalife click here. For more ratings news on Herbalife click here.

Shares of Herbalife closed at $46.63 yesterday.

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