Mid-Day Market Update: Nu Skin Dips On Weak Forecast; EOG Resources Shares Jump

Related BZSUM Mid-Morning Market Update: Markets Open Higher; Time Warner Earnings Top Estimates #PreMarket Primer: Wednesday, November 5: Democrats Lose Control Of The US Senate

Midway through trading Wednesday, the Dow traded up 0.46 percent to 17,463.41 while the NASDAQ surged 0.16 percent to 4,631.15. The S&P also rose, gaining 0.45 percent to 2,021.13.

Leading and Lagging Sectors

In trading on Wednesday, utilities shares were relative leaders, up on the day by about 0.94 percent. Top gainers in the sector included NRG Energy (NYSE: NRG), up 3.2 percent, and NextEra Energy (NYSE: NEE), up 2.6 percent.

Technology shares rose by just 0.05 percent on Wednesday. Top losers in the sector included Pegasystems (NASDAQ: PEGA), down 13.4 percent, and HomeAway (NASDAQ: AWAY), off 11 percent.

Top Headline

Time Warner (NYSE: TWX) reported upbeat earnings for the third quarter.

The New York-based company posted a quarterly net profit of $967 million, or $1.11 per share, versus a year-ago profit of $1.18 billion, or $1.26 per share. Adjusted EPS rose to $1.22 from $0.91. However, adjusted earnings, excluding tax benefit, came in at $0.97 per share.

Its revenue climbed 3% to $6.24 billion. However, analysts were expecting earnings of $0.94 per share on revenue of $6.16 billion.

Equities Trading UP

Coupons.com (NYSE: COUP) shares shot up 28.09 percent to $15.94 after the company reported upbeat quarterly results.

Shares of Callidus Software (NASDAQ: CALD) got a boost, shooting up 14.16 percent to $15.56 after the company reported better-than-expected Q3 results and issued a strong revenue forecast.

EOG Resources (NYSE: EOG) shares were also up, gaining 6.67 percent to $96.30 after the company reported better-than-expected quarterly earnings and raised its production growth forecast.

Equities Trading DOWN

Shares of Albany Molecular Research (NASDAQ: AMRI) were down 22.34 percent to $17.61 after the company reported a Q3 loss of $0.02 per share on revenue of $62.47 million.

FireEye (NASDAQ: FEYE) shares tumbled 15.15 percent to $29.06 after the company reported downbeat third-quarter revenue.

Nu Skin Enterprises (NYSE: NUS) was down, falling 16.43 percent to $42.13 after the company issued a weak forecast for the current quarter.

Commodities

In commodity news, oil traded up 1.10 percent to $78.04, while gold traded down 1.70 percent to $1,147.90.

Silver traded down 2.68 percent Wednesday to $15.53, while copper fell 0.38 percent to $3.01.

Eurozone

European shares were higher today. The eurozone’s STOXX 600 climbed 1.65 percent, the Spanish Ibex Index climbed 1.14 percent, while Italy’s FTSE MIB Index jumped 2.60 percent. Meanwhile, the German DAX rose 1.63 percent and the French CAC 40 jumped 1.89 percent while UK shares climbed 1.32 percent.

Economics

The MBA reported that its index of mortgage application activity declined 2.60% in the week ended October 31, 2014.

Private-sector employers added 230,000 jobs in October, versus 225,000 in September. However, economists were expecting an addition of 220,000 jobs.

The final reading of Markit services PMI fell to 57.10 in October, versus a prior reading of 57.30. However, economists were expecting a reading of 57.10.

The ISM non-manufacturing PMI fell to 57.10 in October, versus a prior reading of 58.60. However, economists were expecting a reading of 58.00.

Posted-In: Earnings News Guidance Eurozone Futures Commodities Econ #s Markets

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Herbalife: ‘Messier Than Expected and We Had Expected Messy’

Even those who weren’t expecting great news from Herbalife appear taken aback by its results last night. Canaccord Genuity’s Scott Van Winkle and Mark Sigal, for instance, call Herbalife’s earnings “messier than expected.” They explain:

Bloomberg News

The Q3 results and guidance revisions were messier than we expected and we had expected messy. We expected that more pronounced headwinds in the US and a Venezuela devaluation could materialize and saw these items as the risks to the quarterly report. However, the negative surprise relative to our estimates wasn't confined to these two markets. Similar to Q2, China continues to drive strong growth (China was the only market to meet our revenue forecast), while underlying strength in EMEA (+15% in constant currency) is being masked by foreign exchange. Beyond these two regions, growth is modest or disrupted. The impact of the Herbalife business model debate has clearly impacted the US, but major markets outside of the US, such as Mexico and Brazil, were softer than we would have thought. The net result was a 5% miss in sales and volume points vs. us that was several percentage points worse than we expected, even after adjusting for Venezuela. Moreover, Q4/14 and F2015 guidance came in significantly softer on a volume point basis.

Van Winkle and Sigal also explain the impact of changes to Herbalife’s business that were made following allegations by Pershing Square’s Bill Ackman:

The guidance is set partly as a reflection of a phased implementation of changes to the global compensation plan (fully effective by February 2015) that are anticipated to temper near-term growth. The plan changes include a first order limitation (previously in 18 markets, now to be global), a sales leader qualification restriction whereby all volume for qualification must be purchased directly from Herbalife rather than from upline distributors (implemented November 1), and a lower threshold for supervisor qualification (4,000 volume points over a 12- month period rather than the historic 5,000-point qualification where large volume purchase were front-end loaded). The net result of these changes is greater line of sight on distributor purchases, as well as more gradual and sustained distributor participation; but of course it's a slower build. The prior roll-out of the 12-month volume point qualification program in the original market resulted in ~60% gains in distributor activity and retention for new qualifying supervisors a year later, but impacted initial volumes. Near term, these plan changes will create a sales headwind until fully anniversaried in Q1/16. But also, any compensation plan change carries disruptive risk.

Despite the disappointment, Van Winkle and Sigal maintained their Buy rating on Herbalife’s stock, though they did slash their price target to $60 from $73.

Shares of Herbalife have plunged 18% to $45.75.