* Sees Q4 EPS of $1.02-$1.05; Street expected $1.01/shr
* Says plans to buy back shares but does not announce new
* Herbalife to report results on Feb. 19
* Shares down 2.2 pct
By Martinne Geller
Jan 17 Weight-loss products company Herbalife
Ltd forecast fourth-quarter earnings above analysts'
estimates on Thursday but did not announce a bigger share
buyback program as some analysts expected, and its shares were
down in afternoon trading.
It also said it expects a temporary bump in expenses due to
its fight with activist hedge fund manager William Ackman, who
last month revealed a short position in the stock, calling the
multi-level marketer a "pyramid scheme" because distributors
earn more than 10 times as much from recruitment as from selling
the company's products.
Since then, the stock has become the site of a battle royale
between some of the hedge fund industry's biggest players.
Third Point LLC's Daniel Loeb acquired a stake of more than
8 percent, and Carl Icahn was reported to have a stake in
Herbalife, according to the Wall Street Journal. A person
familiar with hedge fund Kynikos Associates told Reuters that
short seller Jim Chanos is believed to have been shorting the
stock for a while.
Herbalife shares lost more than a third of their value in
the days following reports of Ackman's short position, and then
more than made up the loss.
Ackman, whose short position is valued at about $1 billion,
was not immediately available to comment on Herbalife's results
Earlier this week, Chanos told Reuters TV that a main
question in assessing the company's business model was whether
customers actually use the product, or if they buy it for the
opportunity to be a distributor.
"At the end of the day, the Herbalife bull-bear battle will
result on who can prove in fact whether or not the business
proposition is good," Chanos said.
The stock had also taken a beating in May, when the company
accelerated another share buyback program after influential
short-seller David Einhorn questioned the composition of its
Herbalife, which will report results on Feb. 19, expects
fourth-quarter earnings to rise to between $1.02 and $1.05 per
share, from 86 cents per share a year earlier.
Analysts on average were expecting $1.01 per share,
according to Thomson Reuters I/B/E/S.
Sales are expected to rise about 20 percent.
Standard & Poor's analyst Tom Graves raised his price target
on Herbalife shares to $45 from $40, expecting buybacks to
bolster the stock. Still, he reiterated his "Hold" rating on
Herbalife, saying "questions/doubts about the business will
The company said on Dec. 24 that it was yet to use $950
million of its authorized $1 billon share buyback program due to
some trading restrictions.
Herbalife said on Thursday that it expects to begin buying
back shares of its stock under an existing $950 million
authorization but it gave no details on timing and did not
announce an additional authorization.
The company hosted an analyst day earlier this month.
Several analysts called the presentation positive and affirmed
their "buy" ratings on the stock.
SunTrust Robinson Humphrey analyst Michael Swartz said at
the time that certain points in the presentation gave him
"greater comfort" in his "Buy" rating.
As for the strong results he expected, Swartz said it would
"unlikely quell the controversy surrounding the company" but
that "we do hope to hear more about the timing of potential
Herbalife shares were down 2 percent at $44.20 in afternoon
trade on the New York Stock Exchange.