Herbalife's India Engine Meets Its GST Anniversary As Street Bets On 46% EPS Growth

Herbalife enters its third-quarter report with a peculiar mix of momentum and math. Profits are expected to jump sharply, yet sales growth is projected to slow to a crawl. The gap between those two figures reflects cheaper debt and easy comparisons. But it also reflects a growth story that has leaned heavily on India just as that market's biggest tailwind, a favorable GST change, begins to lap in September. This report will show whether the recovery has broadened enough to keep going.

Wall Street expects earnings of $0.73 a share on revenue of about $1.30 billion. That works out to roughly 46% EPS growth but only about 2.1% revenue growth from a year ago, a clear step down from the 5.4% reported gain in the second quarter. The revenue estimate sits essentially at the midpoint of management's reaffirmed $1.28 billion to $1.33 billion range, and it would actually come in below last quarter's $1.33 billion. For the full year, the Street's $5.20 billion sits toward the lower half of the company's $5.16 billion to $5.31 billion outlook. Analysts, in other words, have not fully bought the guidance raise management delivered in August. The Earnings Whisper of $0.76 sits modestly above consensus, a sign that the more optimistic crowd expects another beat, though not a dramatic one.

Much of the earnings lift should come from below the operating line. The April refinancing cut quarterly net interest expense to $37 million from $54 million, worth roughly $45 million a year, and that saving flows straight to the bottom line. The offset is a tax rate that management lifted to about 35% from around 30%, a change that cost about $0.14 a share in the second quarter. If Herbalife clears $0.73, look at whether the beat came from operations or from financing and tax. Adjusted EBITDA was essentially flat year over year on a constant-currency basis last quarter, and gross margin slipped 30 basis points to 77.7%. Real operating leverage, rather than interest savings alone, would make the bull case far more durable.

The regional mix is where the narrative gets tested. India grew 33% last quarter on 45% volume growth, and the question now is how gracefully that slows as the GST comparison gets tougher. China, meanwhile, fell 25% with volume down 29%, worsening for a third straight quarter, and management has pushed any payoff out to 2027. EMEA declined 5.6% in constant currency on a 12% volume drop. North America barely grew at 0.2%. To validate the recovery, Herbalife needs signs that China and EMEA are at least stabilizing and that North America can build on its modest gains. The July launches matter here. BionicGo reached the U.S. in July after its June EMEA debut, alongside Helio and Activate Energy, and this is the first quarter that captures them fully. Early evidence that these products are lifting distributor activity, particularly in EMEA, would support management's claim that its investments are now turning into execution.

The market has already rewarded the story. Shares have risen nearly 16% since the last report while the S&P 500 slipped, and bullish sentiment has improved to 42.5% from 30% a quarter ago. Even so, at $13.39 the stock sits below its 200-day moving average of $14.06 and about 10% beneath its post-earnings high of $14.89. That suggests conviction remains incomplete.

The central issue is whether Herbalife can show that its growth survives the end of India's GST boost. A quarter at or above the guidance midpoint, alongside firmer EBITDA, progress toward net leverage below 2x and early traction from the new products, would keep the improving narrative intact. A miss driven by China and EMEA weakness that India can no longer offset would suggest the recovery was narrower than the guidance raise implied.

This earnings preview was originally published on Earnings Whispers.

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