On Thursday, BofA Securities adjusted its outlook on Herbalife (NYSE:HLF), reducing the price target on the company's shares to $8 from $10, while maintaining an Underperform rating. The adjustment follows Herbalife's recent guidance updates, which included a modest net sales growth projection for the first quarter of 1-3%, anticipated adjusted EBITDA between $115 million and $130 million, and capital expenditures ranging from $30 million to $40 million.
For the fiscal year 2024, Herbalife has set a net sales growth target of 0-5%, which is an uptick from the previously projected "flattish" net sales that were announced during the fourth-quarter earnings. The company also forecasts adjusted EBITDA for fiscal 2024 to be in the range of $540 million to $580 million, with capital expenditures expected to be between $125 million and $175 million.
BofA Securities anticipates that Herbalife will likely achieve the lower end of these projections, citing concerns over subdued sales growth and increased selling, general and administrative (SG&A) costs. The company has also unveiled an additional cost-saving initiative, separate from its ongoing transformation program. This new organizational redesign project, which began review in January 2024, is expected to contribute $40 million in savings and is factored into the current guidance.
The redesign project is projected to yield at least $80 million in annual savings starting from 2025. Furthermore, Herbalife has set a target to reduce its gross leverage ratio to three times by the end of 2025. These financial strategies are part of the company's broader efforts to streamline operations and improve its financial metrics in the coming years.
InvestingPro Insights
As Herbalife (NYSE:HLF) navigates through its strategic financial initiatives, the company's market performance and valuations offer a mixed picture. With a market capitalization of approximately $885.11 million, Herbalife's current Price-to-Earnings (P/E) ratio stands at 6.15, which is notably lower than the adjusted P/E ratio for the last twelve months as of Q4 2023, at 4.95. This suggests a relatively modest valuation of the company's earnings potential.
InvestingPro Tips highlight that the stock has experienced a significant price decline over the last three months, with a 40.98% drop, and has seen a 6-month total return decrease of 39.5%. Despite these challenges, analysts predict that the company will remain profitable this year, with a solid free cash flow yield implied by its current valuation. Additionally, Herbalife does not pay a dividend to shareholders, which could be a consideration for income-focused investors.
Investors may find further insights and tips on Herbalife by exploring more on InvestingPro, which features additional tips on the company's financial health and stock performance. For those looking to deepen their analysis, using the coupon code PRONEWS24 can provide an extra 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 additional InvestingPro Tips available for Herbalife, which could offer valuable perspectives for making informed investment decisions.
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