Stock Story -
Health and wellness products company USANA Health Sciences (NYSE:USNA) fell short of the market’s revenue expectations in Q3 CY2024, with sales falling 6.2% year on year to $200.2 million. The company’s full-year revenue guidance of $850 million at the midpoint also came in 1.4% below analysts’ estimates. Its GAAP profit of $0.56 per share was 15.5% above analysts’ consensus estimates.
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USANA (USNA) Q3 CY2024 Highlights:
- Revenue: $200.2 million vs analyst estimates of $205.8 million (2.7% miss)
- EPS: $0.56 vs analyst estimates of $0.49 (15.5% beat)
- The company dropped its revenue guidance for the full year to $850 million at the midpoint from $865 million, a 1.7% decrease
- EPS (GAAP) guidance for the full year is $2.45 at the midpoint, missing analyst estimates by 1.8%
- Gross Margin (GAAP): 80.4%, in line with the same quarter last year
- Market Capitalization: $667.8 million
Company OverviewGoing to market with a direct selling model rather than through traditional retailers, USANA Health Sciences (NYSE:USNA) manufactures and sells nutritional, personal care, and skincare 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
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years.USANA is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale.
As you can see below, USANA’s demand was weak over the last three years. Its sales fell by 11.2% annually, showing demand was weak. This is a poor baseline for our analysis.
This quarter, USANA missed Wall Street’s estimates and reported a rather uninspiring 6.2% year-on-year revenue decline, generating $200.2 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 1.1% over the next 12 months, an acceleration versus the last three years. Although this projection indicates the market believes its newer products will spur better performance, it is still below average for the sector.
Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.USANA has shown impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.1% over the last two years, better than the broader consumer staples sector.