Herbalife Ltd. (HLF) recently announced it had received licenses to sell its products in a number of Chinese provinces, creating a sales channel directed towards millions of potential customers.

Company Description

Herbalife Ltd sells weight management and nutritional supplement products worldwide. The company sells its products through a network of independent distributors and has a market cap of $1.83 billion.

Shares of HLF have been resilient in the face of a tough economy, helped by the company’s first-quarter earnings beat, reported on May 4.

First-Quarter Results

Sales were down 14% from last year to $521.7 million, but earnings came in at 68 cents per share, 9 cents ahead of the consensus. The company has surprised and beat in each of the last four quarters by an average of 6 cents, or 8%.

Earnings Details

Herbalife provided some details about results, noting that its cash flow from operations increased to $86 million and reduced its debt by $50 million to $150.7 million.

China Heating Up

More recently, Herbalife announced it had received approval for five additional licenses from the Chinese Ministry of Commerce to conduct direct-selling business in the provinces of Fujian, Shan’Xi, Sichuan, Hubei and Shanghai.

The company had previously received a license for Beijing in July 2008 which is now active. Herbalife now has licenses to sell in 11 Chinese provinces, representing about 599 million potential customers.

Estimates Rise

With a plethora of good news in hand, estimates have been on the rise. The current year is up 11 cents in the last 90 days to $2.97 per share. The next-year estimate is pegged at $3.38, a bullish 14% earnings growth projection.

The Chart

Shares of HLF have been advancing after bottoming out in early March just above $12. Shares have since crossed the $31 mark, a very impressive short-term return. Take a look at the chart below.


Zacks Investment Research