Herbalife (HLF) – Upping Outlook and A Few Other Surprises

July 31, 2012 9:49 am

When improving fundamentals are confirmed with a bullish chart pattern poised for a rapid move, there is a greater potential for a profitable trade. On Monday night, Herbalife (HLF) reported an impressive quarter for both EPS and revenue as well as a strong outlook for the rest of the year.

Herbalife (HLF) beat EPS, revenues and boosted their outlook. You may recall that the company had also provided a good earnings report last quarter, but on that conference call the now famous “Einhorn query” spooked investors and shares slid 35%. The conference call is scheduled for 11am ET. Assuming there are no surprise guests asking about some obscure earnings item, share could be ready to rally hard.

As the earnings report looked solid on all counts, there is a rather significant fast zone/gap that may be in play. Looking to get ahead of the move, investors bid up shares by 6.1% with good volume in the after-hours session.

The table below shows the impressive growth the company was able to achieve this quarter:

Some additional information:

  • Second quarter volume points of 1.2 billion increased 23 percent with increases in each of its six regions compared to the prior year period.
  • Second quarter EPS of $1.10 increased 25 percent compared to the prior year period EPS.
  • Raising FY’12 EPS guidance to a range of $3.88 to $3.98.
  • Board of directors approved a $0.30 per share quarterly dividend.
  • Board of directors approved a new $1 billion share repurchase authorization.
  • Company announces a $500 million increase in its credit facility.

The cherry on top of the report was a new share repurchase plan.

Following the completion of the prior $1 billion share repurchase authorization, the company’s Board of Directors authorized a new $1 billion share repurchase authorization available to be utilized over the next 5-year period, expiring on June 30, 2017.

Looking at the chart indicators shows that above $55.60 and the shares could see a monumental short-squeeze.

The earnings conference call is scheduled for 11am ET on Tuesday. We will be watching for any potential signs for a downside reversal. If there is anything odd that occurs, we will send an ALERT! with further information.

Link to original ALERT! for Herbalife.


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