Activist investing and special situations.

Herbalife (HLF): Earnings Beat, Ups Guidance, Who Cares?

Added on by Lee Ho Fook.

Herbalife (NYSE:HLF) is up 9% in the after market, this after posting EPS that beat estimates, and after the company upped its 2013 guidance. 

Herbalife posted $1.05 EPS. Sales came in at $1.1 billion, according to the earnings release. The consensus was that the MLM company would post EPS of $1.03 on sales of $1.049 billion. 

Herbalife Ltd. (HLF) today reported fourth quarter net sales of $1.1 billion, reflecting an increase of 20 percent compared to the same time period in 2011 on volume point growth of 18 percent. Net income for the quarter of $117.8 million, or $1.05 per diluted share, compares to 2011 fourth quarter net income of $105.4 million and EPS of $0.86, respectively.

Despite all the noise and sword-wielding that billionaires Bill Ackman (who is short) and Carl Icahn (who is long) are doing, there are still questions surrounding the company.

Herbalife has denied Ackman's claims saying he used "outdated" and "inaccurate information" when putting together his massive 342-slide short case presentation, but he raises interesting questions, ones the company is yet to address.

My real issue is that although the numbers are solid, fundamentally solid cash flow generation, the real issue is: If it is indeed a pyramid scheme, none of this matters. A ponzi scheme makes money for its owners in the interim, but it is still illegal and ultimately collapses. The numbers are one thing, which Icahn believes in, but the business model questions, which Ackman has raised, is another thing. It shall be interesting to see how both hedge fund titans address the news, but I have a feeling it will be more of the same. More to come on Herbalife, stay tuned and sign up to receive updates via email...