Herbalife stock slammed after disappointing quarter

Shares of Herbalife (HLF) plunged 20 percent Tuesday to $44.60 after the nutritional products company reported a massive slide in profit for the third quarter.

The stock was also hit after the company dialed back its sales and profit expectations for the current quarter. Some analysts cut their estimates for Herbalife in response.

Momentum seemed to be firmly against the company, which sells nutritional products around the world through independent sales representatives. It has been criticized for years as a pyramid scheme by hedge fund manager Bill Ackman. Herbalife has denied those accusations and seemed to shrug off the conflict, beating analyst estimates quarter after quarter.

Its track record has faltered this year, however. The third quarter marked the second quarter in a row that Herbalife has disappointed Wall Street. Excluding one-time charges, profit came in at $1.45 a share. Analysts were expecting around $1.51 a share. Sales rose 4 percent to $1.26 billion.

The company saw a huge impact from Venezuela in the quarter. Currency changes there led Herbalife to take a charge of nearly $140 million, or 97 cents a share.

Executives repeatedly tried to frame the quarterly stumble as a short-term hiccup during a conference call with analysts Tuesday. "We are at a single point of a much larger journey," said chief executive Michael Johnson. "It may mean a short-term slowdown in our historical growth rate."

Before Herbalife announced its results Monday evening, its shares had fallen about 29 percent this year.

The remainder of 2014 doesn't look much brighter. The company said net sales could see a drop of between 5 percent and 8 percent from the same period last year. Quarterly earnings could come in at between just $1.30 to $1.40 a share, a steep slide from Herbalife's previous estimate of $1.69 a share.

Observers noted that not much makes the stock attractive right now. "Herbalife is an enjoy-the-show stock and nothing more," wrote Dan Burrows at InvestorPlace. Jim Cramer, speaking on his "Squawk on the Street" program, added: "We have to acknowledge the fact that the impact of the nonstop, 24-hour 'Herbalife is a scam' Ackman call is having an impact."

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.