Wellness products company Nature’s Sunshine (NASDAQ: NATR) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 8.5% year on year to $118.2 million. The company expects the full year’s revenue to be around $457.5 million, close to analysts’ estimates. Its non-GAAP loss of $0 per share was significantly below analysts’ consensus estimates.
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Nature's Sunshine (NATR) Q4 CY2024 Highlights:
- Revenue: $118.2 million vs analyst estimates of $109.3 million (8.5% year-on-year growth, 8.1% beat)
- Adjusted EPS: $0 vs analyst estimates of $0.20 (significant miss)
- Adjusted EBITDA: $10.27 million vs analyst estimates of $10.86 million (8.7% margin, 5.5% miss)
- Management’s revenue guidance for the upcoming financial year 2025 is $457.5 million at the midpoint, in line with analyst expectations and implying 0.7% growth (vs 2.2% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $41 million at the midpoint, below analyst estimates of $44.35 million
- Operating Margin: 3.8%, down from 5.1% in the same quarter last year
- Free Cash Flow Margin: 8.5%, similar to the same quarter last year
- Market Capitalization: $272.3 million
“The fourth quarter was one of our strongest quarters ever, with revenue of $118 million, reflecting growth of 8.5% year-over-year and 10% on a constant currency basis,” said Terrence Moorehead, CEO of Nature’s Sunshine.
Company Overview
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.
Personal Care
While personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering. Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.
With $454.4 million in revenue over the past 12 months, Nature's Sunshine is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
As you can see below, Nature's Sunshine struggled to increase demand as its $454.4 million of sales for the trailing 12 months was close to its revenue three years ago. This shows demand was soft, a rough starting point for our analysis.
This quarter, Nature's Sunshine reported year-on-year revenue growth of 8.5%, and its $118.2 million of revenue exceeded Wall Street’s estimates by 8.1%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection doesn't excite us and indicates its newer products will not lead to better top-line performance yet.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Nature's Sunshine has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 5% over the last two years, slightly better than the broader consumer staples sector.
Taking a step back, we can see that Nature's Sunshine’s margin dropped by 3.8 percentage points over the last year. If its declines continue, it could signal higher capital intensity and investment needs.
Nature's Sunshine’s free cash flow clocked in at $9.99 million in Q4, equivalent to a 8.5% margin. This cash profitability was in line with the comparable period last year and above its two-year average.
Key Takeaways from Nature's Sunshine’s Q4 Results
We were impressed by how significantly Nature's Sunshine blew past analysts’ revenue expectations this quarter. On the other hand, its EPS and EBITDA missed, and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $14.50 immediately after reporting.
The latest quarter from Nature's Sunshine’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
