Will This Downgrade Hurt Herbalife (HLF) Today?

NEW YORK (TheStreet) -- Herbalife (HLF) was downgraded by Argus to "hold" from "buy" on Friday. The downgrade was due to the ongoing Federal Trade Commission civil investigation into the nutrition and weight loss supplement maker.

"The company posted strong results in 2013, and we believe that its core business remains solid. However, in view of the significant risks posed by the FTC investigation, we think that the shares have limited near-term upside and that a Hold rating is now appropriate," the Argus report notes.

Shares of Herbalife were down 2.3% to $49.59 in early trading Friday

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Separately, TheStreet Ratings team rates HERBALIFE LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate HERBALIFE LTD (HLF) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 19.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 47.25% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HLF should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • HERBALIFE LTD has improved earnings per share by 15.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HERBALIFE LTD increased its bottom line by earning $4.91 versus $3.95 in the prior year. This year, the market expects an improvement in earnings ($6.00 versus $4.91).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Personal Products industry average, but is less than that of the S&P 500. The net income increased by 10.1% when compared to the same quarter one year prior, going from $112.21 million to $123.54 million.
  • Net operating cash flow has increased to $195.89 million or 16.67% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -23.98%.
  • You can view the full analysis from the report here: HLF Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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