Nu Skin (NUS) Significant Share Repurchase Likely - Deutsche Bank
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Price: $7.63 -0.39%
Rating Summary:
3 Buy, 10 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0
Rating Summary:
3 Buy, 10 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0
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Deutsche Bank reiterated a Buy rating on Nu Skin Enterprises (NYSE: NUS) with a price target of $110.00. Comments follow news the company was fined only $540 thousand by China regulators. Analyst Bill Schmitz thinks significant share repurchase are likely.
"With normal business activities resuming in China, the bias to numbers is clearly to the upside, noting that we assume Mainland China business declines 1% in local currency in FY14 and will wait to better assess any impact on brand equity and recruitment activity implied in the company's updated FY14 guidance before adjusting any estimates," said Schmitz. "Assuming the investigation has no material impact on the company’s business in China, we see a clear path to $8 in EPS by 2015, with the stock trading around 12x this estimate based on premarket activity."
"The balance sheet remains significantly under-levered and with China overhang removed, we expect significant share repurchase over the next several quarters, depending in part on stock price performance. As of December, the company had $340m in net cash and could repurchase ~15% of outstanding shares by putting one turn of net debt on the balance sheet, acknowledging it is unlikely that the conservative management team will add meaningful leverage to the business to fund share repurchase. Importantly, significant share repurchase activity will probably have to wait until updated FY14 guidance is conveyed, most likely along with the company's Q1 earnings release in early May," added the analyst.
For an analyst ratings summary and ratings history on Nu Skin Enterprises click here. For more ratings news on Nu Skin Enterprises click here.
Shares of Nu Skin Enterprises closed at $75.00 yesterday.
"With normal business activities resuming in China, the bias to numbers is clearly to the upside, noting that we assume Mainland China business declines 1% in local currency in FY14 and will wait to better assess any impact on brand equity and recruitment activity implied in the company's updated FY14 guidance before adjusting any estimates," said Schmitz. "Assuming the investigation has no material impact on the company’s business in China, we see a clear path to $8 in EPS by 2015, with the stock trading around 12x this estimate based on premarket activity."
"The balance sheet remains significantly under-levered and with China overhang removed, we expect significant share repurchase over the next several quarters, depending in part on stock price performance. As of December, the company had $340m in net cash and could repurchase ~15% of outstanding shares by putting one turn of net debt on the balance sheet, acknowledging it is unlikely that the conservative management team will add meaningful leverage to the business to fund share repurchase. Importantly, significant share repurchase activity will probably have to wait until updated FY14 guidance is conveyed, most likely along with the company's Q1 earnings release in early May," added the analyst.
For an analyst ratings summary and ratings history on Nu Skin Enterprises click here. For more ratings news on Nu Skin Enterprises click here.
Shares of Nu Skin Enterprises closed at $75.00 yesterday.
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