Nu Skin (NUS) Up 11.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Nu Skin Enterprises (NUS). Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nu Skin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Nu Skin's Q1 Earnings Beat Estimates, Decline Y/Y
Nu Skin Enterprises released first-quarter 2020 results, with earnings and sales declining year over year. Reduced sales leaders, especially in Mainland China, hurt quarterly results. Also, Nu Skin continued to battle foreign currency headwinds. Nevertheless, both the top and the bottom line surpassed the Zacks Consensus Estimate.
Q1 Highlights
Nu Skin delivered quarterly earnings of 36 cents a share, which beat the Zacks Consensus Estimate of 24 cents. However, the bottom line tumbled 53% from earnings of 77 cents reported in the year-ago quarter.
Revenues of $518 million fell 17% year over year. Nevertheless, the metric surpassed the Zacks Consensus Estimate of $474 million. First-quarter revenues included a negative impact of 2% (or $14.3 million) from foreign currency fluctuations. Also, a reduced sales leader count due to declines across all regions hurt revenues.
Sales leaders were 49,551, down 22% year over year, with Mainland China accounting for majority of the decline. In fact, sales leaders deteriorated in all regions. Further, Nu Skin’s customer base fell 5% year over year to 1,130,947, with declines in all regions except Southeast Asia (up 5% year over year) and Mainland China (flat year over year).
Gross profit came in at $392.2 million, down 17.8% from the year-ago quarter’s figure. Gross margin contracted 80 basis points (bps) year over year to 75.7%. Nu Skin’s base business gross margin expanded 60 bps on a year-over-year basis to 78.1%.
Selling expenses amounted to $206 million, which accounted for 39.8% of revenues compared with 40% in the year-ago quarter. Meanwhile, general and administrative expenses of $149.6 million accounted for 28.9% of revenues, up from 25.4% in the year-ago quarter. Operating income came in at $36.6 million, while operating margin fell year over year from 11% to 7.1%.
Regional Results
Revenues declined across all regions from the prior-year quarter’s level. The highest drop was witnessed in Mainland China, where the metric fell 34%. Further, revenues fell 14% in the Americas/Pacific, 10% in South Korea, 4% in Southeast Asia, 12% in Hong Kong/Taiwan, 1% in Japan and 15% in EMEA.
Other Financial Details
Nu Skin ended the quarter with cash and cash equivalents of $352.6 million, long-term debt of $327.2 million and stockholders' equity of $800.5 million. During the quarter, the company paid out dividends of $20.7 million.
In a separate press release, Nu Skin announced a dividend of 37.5 cents per share payable on Jun 10, to shareholders of record as of May 29.
Guidance
Nu Skin continues to focus on improving sales leaders through technological advancements. Moreover, the company has been witnessing improved trends in Mainland China region as restrictions related to contain the spread of coronavirus are being lifted gradually. Management expects this trend to continue in other markets globally. This along with global preview of its new beauty device, late in 2020, is likely to enable the company to return to growth by the year end.
Management expects 2020 revenues in the range of $2.17-$2.26 billion, including currency headwinds of 2-3%. In 2019, Nu Skin’s revenues amounted to $2.42 billion. Prior to this, the company had anticipated 2020 revenues of $2.17-$2.30 billion, including currency headwinds of 1-2%.
Further, 2020 earnings are projected in the range of $2.05-$2.35 per share, which indicates a decline from $3.10 delivered in the prior-year quarter. Earlier, Nu Skin had envisioned earnings in the range of $2.00-$2.40 per share.
For the second quarter, thecompany projects revenues in the band of $520-$550 million that includes adverse currency impacts of 3-4%. Earnings are anticipated between 42 cents and 52 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 17.6% due to these changes.
VGM Scores
At this time, Nu Skin has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Nu Skin has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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