Activists and Short Sellers Brace for Herbalife Corporate Earnings

Earnings are expected to come to $1.07 per share, versus $0.88 per share a year ago. Sales are expected to have risen by 15% to $1.11 billion in revenue. It very unusual for the firm to offer up guidance under the current circumstances, but the estimates for one quarter out are $1.26 per share earnings and $1.17 billion in revenue.

Another exception here is that Wall Street and Main Street are going to have a hard time focusing on the results. With the warring that has taken place, it would be no surprise if this has caused some serious business disruption or distraction.

The short interest, according to Nasdaq data, is still up at a whopping 32.739 million shares. That is not the highest reading for 2013, but it is still twice the short interest from before Bill Ackman came out so vocal against the company as a pyramid scheme.

We are not sure about using traditional options metrics and charts for this, given it battleground status. Many investors and traders are merely staying on the sidelines until the dust settles. We also are unsure about what regulatory and legal updates management will make today, but we expect to hear something on the matter. Options traders appear to be braced for a move of $2.40 or $2.60 in either direction. Be advised that this is using the monthly speculative options rather than weekly options.

The chart has been more of a magnet than we might have guessed going into earnings, and shares have been somewhat range-bound for the past two months. With shares at $38.27 as of Friday’s close, the 50-day moving average is down at $38.07 and the 200-day moving average is up at $44.24. With shares having closed out Friday at $38.27, the 52-week range is $24.24 to $71.02.

The last thing we would note is that, regardless of what Herbalife releases, we expect that Bill Ackman will attack the company Tuesday morning (if not sooner). We would bet money that Ackman will not be allowed to ask any questions, and that he will bash the company yet again for not addressing his concerns.

We also have two supporting documents here for investors and traders alike:

• This was the KPMG auditor resignation after reported insider trading took place that was not the fault of the company.
• We also saw the company claim that it believes itself to still be within NYSE guidelines for listing.