Why Herbalife Stock Crushed the Market Today

Investors liked the news they heard about multilevel nutrition-supplement company Herbalife (NYSE: HLF) on Thursday. The company released rather pleasing quarterly results and was rewarded with a nearly 11% boost in its share price. This occurred on a day when the bellwether S&P 500 index was notably in negative territory, closing 1.9% lower.

A pair of declines

Herbalife's third-quarter earnings, published just after market hours on Wednesday, showed the company's net sales were $1.2 billion for the period. That was down by more than 3% from the same quarter of 2023. As for profitability, it fell more precipitously -- non-GAAP (adjusted) net income was $58 million ($0.57) against the 2023 Q3 surplus of more than $65 million.

Despite the bottom-line slide, analysts were expecting a much lower number. Collectively, they were estimating that Herbalife would only book adjusted-net income of $0.31 per share. Meanwhile, their average-revenue estimate was a bit higher at $1.24 billion.

Investors cheered not only the bottom-line beat but also news of a balance sheet getting cleaner. Herbalife quoted CFO John DeSimone as saying that the company paid down debt during the quarter and "Our total leverage ratio is down to 3.3 times at September 30 and we are on track to reduce our total leverage ratio to 3.0 times by the end of 2025, as well as reduce total debt by $1 billion over the next four to five years."

Positive-guidance adjustment

What also helped boost investor confidence was a positive revision of annual guidance. Herbalife's management now feels the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024 would come in at $590 million to $620 million; previously, it was estimating $560 million to $600 million. The full-year 2023 figure was just under $571 million.

Herbalife also narrowed its projection for the development of net sales. The new guidance is for a decline of 1% to 2% from last year's nearly $5.1 billion. The company had initially guided for a range of 1.5% growth to a 3.5% decline.

Management did not provide any net-income forecasts.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.