Herbalife, the nutrition company struggling with slowing growth and a regulatory probe, surged in extended trading after boosting its full-year earnings forecast amid higher sales in China.
The shares jumped as much as 17 per cent to $46.89 at 4:28 p.m. in New York trading. Earnings per share for 2015 will be as much as $4.60, excluding some items, Herbalife said in a statement Tuesday. That’s up from a previous forecast of a maximum of $4.50. Analysts had projected $4.24, the average of estimates compiled by Bloomberg.
Herbalife is mired in a two-year battle with billionaire hedge fund manager Bill Ackman, who has accused the company of running an illegal pyramid scheme. The nutrition company has repeatedly denied the allegation, but the criticism prompted a probe by the Federal Trade Commission and pressured Herbalife into adjusting its business model, hurting sales growth.
“Our business fundamentals remain strong and we are confident our strategy is the right one, as evidenced by what we are seeing today,” Michael Johnson, chairman and chief executive officer of Herbalife, said on a conference call.
Net income in the first quarter rose 4.8 percent to $78.2 million, or 92 cents a share, from $74.6 million, or 74 cents, a year earlier, the Los Angeles-based company said Tuesday. While revenue declined 12 percent to $1.11 billion in the quarter, that exceeded analysts’ projections. Sales in China, meanwhile, rose 21 per cent. That helped offset a 34 per cent drop in South and Central America and a 9 per cent decline in North America.
In a regulatory filing Tuesday, Herbalife said the U.S. Department of Justice contacted the company about the allegations related to its business practices. Previously, a company spokesman confirmed reports in April that several Herbalife distributors had been contacted by Federal law enforcement. The company is cooperating, according to the filing.
Bloomberg News, edited by ESM
