Herbalife Ltd. Shares Soar After Ackman Exits Bet Against Herbalife

Herbalife Ltd. (NYSE: HLF)

Shares of Herbalife Ltd. soar more than 7% in trading Wednesday after a news that billionaire hedge-fund activist Bill Ackman had exited a massive gamble that the nutritional-supplement maker would fall to zero. The share price moved up as much as 8.6%, or by $7.44, to $94.25 during trading.

Ackman made a bet against Herbalife Ltd. five years ago through his hedge fund company Pershing Square Capital Management LP, accusing the nutritional-supplement company of operating a pyramid scheme. Herbalife Ltd. has persistently denied those accusations and the bet that it would eventually collapse in value.

Wednesday’s surge was also spiked by the reaction to Herbalife’s plans intensifying its share purchase program and of conducting a 2-for-1 split of its stock. The company also intends to change its name to Herbalife Nutrition Ltd. to reflect its growing expertise and leadership in the nutrition field.

HLF Earnings & Outlook

Herbalife reported better-than-anticipated 4Q2017 earnings per share (EPS) on Feb 22, 2018. Its 4Q2017 adjusted earnings per share (EPS) was $1.29, neatly surpassing Wall Street’s estimate of $0.95 and increasing 28% on a year-over-year basis.

The company’s top line was boosted by favorable currency rates, improved pricing, and strong performances in China, Europe, the Middle East, and Africa.

HLF expects its 1Q2018 adjusted EPS to be $0.9–$1.1, reflecting a year-over-year decline when compared with $1.24 adjusted EPS in 1Q2017. Tough year-over-year comparisons in China and North America are likely to remain a drag on the company’s 1Q2018 results. For the full year, the Herbalife expects its bottom line to be $4.6–$5.

Herbalife’s CEO Comments

Rich Goudis, the chief executive of Herbalife Ltd. said in a statement that his company’s strong financial performance is a testament to the demand for its quality nutrition products, great-tasting, the company’s unique, personalized and effective distribution channel and its global geographic reach.