Why Nu Skin Enterprises Shares Popped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Nu Skin Enterprises , which makes and distributes anti-aging and nutritional products, advanced as much as 11% after updating its guidance for the fourth quarter.
So what: For the quarter, Nu Skin sees profit coming in at $0.94 to $0.96 as revenue is expected to jump 19% year over year to $588 million. Both figures crush the current Wall Street expectation of $0.83 in EPS and $530.3 million in sales, and handily surpassed Nu Skin's previous revenue guidance of $530 million. In addition, CEO Truman Hunt in that same press release made clear that his company will be boosting its first dividend payment in 2013 and thereafter by 50%, and expects another record year in 2013 in terms of profit and revenue.
Now what: I won't deny that this shaped up to be a fantastic quarter for Nu Skin, but two factors continue to run yellow caution tape around the company. First, I'm just not a big fan of the nutritional supplements business. Although Nu Skin does get a good chunk of revenue from personal care products, which are less susceptible to economic swoons, nutrition suppliers receive very little brand loyalty from customers and tend to get stuck in cyclical patterns. Also, there's the overhang of the ongoing battle between optimists and pessimists over Herbalife.
Herbalife and Nu Skin operate in a very similar business model. In fact, Nu Skin had allegations brought against it in August by short-selling specialist Citron Research that it was running a multilevel marketing scheme out of China. Until the circus surrounding Herbalife concerning whether or not it's running a pyramid scheme dies down, it's probably best to keep your distance from Nu Skin, its guilt-by-association partner.
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The article Why Nu Skin Enterprises Shares Popped originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and has bought calls on, Herbalife. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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