Herbalife Ltd. Earnings Missed Analyst Estimates: Here's What Analysts Are Forecasting Now

Shareholders in Herbalife Ltd. (NYSE:HLF) had a terrible week, as shares crashed 33% to US$8.07 in the week since its latest yearly results. Revenues were in line with forecasts, at US$5.1b, although statutory earnings per share came in 16% below what the analysts expected, at US$1.42 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Herbalife

Following last week's earnings report, Herbalife's five analysts are forecasting 2024 revenues to be US$5.09b, approximately in line with the last 12 months. Per-share earnings are expected to soar 43% to US$2.05. In the lead-up to this report, the analysts had been modelling revenues of US$5.14b and earnings per share (EPS) of US$3.07 in 2024. So there's definitely been a decline in sentiment after the latest results, noting the large cut to new EPS forecasts.

It might be a surprise to learn that the consensus price target fell 21% to US$13.60, with the analysts clearly linking lower forecast earnings to the performance of the stock price. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Herbalife analyst has a price target of US$19.00 per share, while the most pessimistic values it at US$10.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Herbalife's revenue growth is expected to slow, with the forecast 0.5% annualised growth rate until the end of 2024 being well below the historical 1.3% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.1% per year. Factoring in the forecast slowdown in growth, it seems obvious that Herbalife is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Herbalife. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Herbalife's revenue is expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Herbalife's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Herbalife. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Herbalife analysts - going out to 2025, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 4 warning signs for Herbalife (2 can't be ignored!) that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.