UPDATE 3-Nu Skin profit rises, stock down on Japan weakness

(Adds analyst comments)

By Erin Zureick

CHICAGO, July 31 (Reuters) - Nu Skin Enterprises Inc (NUS.N) posted better-than-expected quarterly profit and raised its full-year sales outlook, but weakness in its Japanese market dampened investors' spirits, and its shares fell as much as 9 percent.

The direct seller of skin care products said it was forming a new management team for Japan and South Korea, which make up its largest market. Quarterly sales were down 13 percent in Japan.

"We are not inclined to make excuses for poor performance," Chief Executive Truman Hunt said on a conference call, adding that the weak Japanese sales would likely continue in the second half of the year.

Net profit for the second quarter jumped 49 percent to $20.6 million, or 32 cents per share, from $13.8 million, or 21 cents per share, a year earlier. That topped analysts' average estimate of 28 cents per share, according to Reuters Estimates.

Revenue rose 12 percent to $321.7 million, driven by an 88 percent increase in Latin America and a 61 percent increase in Europe. Sales in China and Taiwan rose 7 percent.

The weak U.S. dollar accounted for about half the revenue growth and added 3 cents to earnings per share. The sales decline in Japan was due in part to a "tough regulatory environment," the company said.

The dollar weakness boosts the value of overseas sales when they are converted to U.S. currency for inclusion on its income statement.

Nu Skin shares were down $1.06 at $16.15 on the New York Stock Exchange after falling as low as $15.63 earlier on.

Wedbush Morgan Securities analyst Rommel Dionisio cut his price target of Nu Skin to $20 from $22 on Thursday but maintained his "buy" rating and said the company has long-term growth potential, particularly in the Chinese market.

DA Davidson analyst Tim Ramey kept his "buy" rating on the stock as well as his $22 price target.

"These shares remain significantly undervalued, in our view," he wrote in a research note, adding that he believes the Japanese business will eventually turn around.

LOOKING AHEAD

Nu Skin raised its full-year sales outlook to a range of $1.23 billion to $1.24 billion from $1.21 billion to $1.22 billion previously. It maintained its earnings per share forecast of $1.17 to $1.22.

Analysts on average have been expecting 2008 full-year EPS of $1.19 on revenue of $1.23 billion, according to Reuters Estimates.

The Provo, Utah-based company also said it expects third-quarter revenue of $305 million to $310 million, with earnings of 30 to 32 cents per share.

Analysts, on average, have expected third-quarter revenue of $310.4 million, with earnings of 32 cents per share.

The company said its forecast assumes that sales in Japan continue to fall at about the same rate as the second quarter. (Editing by Gerald E. McCormick and Braden Reddall)