Herbalife Nutrition attracts rating downgrades after annual forecast cut (NYSE:HLF)

Herbalife Nutrition (NYSE:HLF) shares have dropped 9% after Jefferies downgraded its ratings on the stock from Buy to Hold, while slashing its price target by more than half, from $60 to $26.

The revisions are in response to the firm’s Q1 earnings announcement and its outlook for the full year and current quarter that fell short of expectations.

The nutritional products provider generated adj. EPS of $0.99 on revenue of $1.34B (-10.7% Y/Y), which missed estimates.

Herbalife (HLF) cut its adjusted EPS guidance for the full year, from $4.25 to $4.75 previously to $3.50 to $4.00 (vs. consensus of $4.63). Meanwhile, net sales is expected to range from -10% to -4% YoY decline. For Q2, it projects net sales decline of -17.5% to -11.5% Y/Y and adj. EPS between $0.60-$0.80 vs. $1.20 consensus.

Analyst Stephanie Wissink stated, “while disappointing guidance was expected given lockdowns in China and suspended operations in Russia, the magnitude was surprising.”

“Historic KPIs are proving less predictive, dispersion in the measures is more extreme, and individual markets are more vulnerable to isolated macro impacts,” Wissink wrote, referring to key performance indicators.

Despite a sales outlook reduction, Herbalife anticipates net sales to be flat in the back half of 2022, and will return to year-over-year net sales growth in Q4.

Other brokerages also expressed their disappointment with PT cuts. B Riley Securities cut the target on the stock from $50 to $41 and Citigroup lowered it from $46 to $36.