News Column

Daily Wrap: Herbalife bulls aren't afraid of the big bad short

July 22, 2014

By David Nicklaus, St. Louis Post-Dispatch

July 22--TODAY'S INDEXES -- Dow industrials 17113.54 + 61.81

S&P 500 1983.52 + 9.89

Nasdaq 4456.02 + 31.31

UNCONVINCED: Activist investor Bill Ackman has a large short position in Herbalife and claims that the seller of weight-loss products is a pyramid scheme. Today, at what he called the most important presentation of his career, Ackman unveiled research that he says shows a loss of $12,000 a year for each Herbalife nutrition club. Investors weren't swayed: Herbalife shares jumped 25.5 percent after Chief Financial Officer John Desimone expresssed "complete confidence in our compliance." (Post Holdings CEO William Stiritz is among the shareholders who shares that confidence; he disclosed a stake in Herbalife last year and owns 7.6 percent of the company.)

EARNINGS OPTIMISM: Major market indexes posted modest gains, aided by several upbeat earnings reports. The S&P 500 is now just two points below the record it set on July 3; the Dow industrials are less than 25 points from record territory.

MORE BURRITOS, PLEASE: Chipotle Mexican Grill shares surged 11.8 percent after the company beat earnings estimates, partly on the strength of a successful price increase.

... BUT HOLD THE COKE: Coca-Cola beat earnings estimates by a penny, but investors didn't like a 1.4 percent revenue decline, driven by falling sales of juice and Diet Coke. The shares fell 2.9 percent.

TIRE TRADE: Goodyear Tire & Rubber shares rose 2.6 percent after the U.S. International Trade Commission said it would proceed with an investigation of alleged tire subsidies by China.

LOCAL INDEX: The Bloomberg St. Louis Index gained 0.7 percent, a little more than the broad market.


Reliv International 47.1% Allied Healthcare -3.6%

Centene 5.8% Foresight Energy -2.1%

Huttig Bldg Products 3.9% World Pt Terminals -1.2%

LOCAL GAINER: Centene shares jumped after the health-care company delivered a double dose of good earnings news. It beat earnings estimates for the second quarter, and raised its revenue and profit guidance for the rest of 2014.

ANALYST'S INSIGHTS: Moody's downgraded Laclede Group's debt by a notch to Baa2 after the company got Alabama regulators' approval to buy Alabama Gas. "The downgrade reflects an expected increase in parent level debt to over 30 percent of total consolidated debt to fund the pending acquisition of Alagasco," Moody's analyst Jeffrey Casella said in a statement.

THE DAY AHEAD: Wednesday's a heavy day for earnings reports, including numbers from Boeing, Delta Air Lines and Pepsico in the morning and AT&T and Facebook after the closing bell. Analysts expect Boeing to report a profit of $1.98 a share, up 19 percent from a year ago.

David Nicklaus is business columnist at the St. Louis Post-Dispatch. Subscribe to his Facebook page or follow him on Twitter @dnickbiz.


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Source: St. Louis Post-Dispatch (MO)

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