Weight-loss products company Herbalife Ltd. forecast fourth-quarter earnings above analysts' estimates but said it expects a temporary bump in expenses to its fight with activist hedge fund manager William Ackman.
The direct seller of protein shakes and dietary supplements also said on Thursday it expects to begin buying back shares of its stock under an existing $950 million authorization.
Last month, Ackman revealed a short position in Herbalife and called its direct business model a "pyramid scheme" because distributors earn more than 10 times as much from recruitment as from selling the company's products.
Herbalife shares, which lost more than a third of their value in the days following reports of Ackman's short position, had more than recovered on news that Daniel Loeb acquired a stake of more than 8 percent.
They were down 2.2 percent in late morning trade on Thursday to $44.09.
Ackman is not alone in his quest. A person familiar with hedge fund Kynikos Associates said short seller Jim Chanos is believed to have been shorting Herbalife shares for a while.
Earlier this week, Chanos told Reuters TV that a main question in assessing the company's business model was whether customers actually use the product, or if they buy it for the opportunity to be a distributor.
"At the end of the day, the Herbalife bull-bear battle will result on who can prove in fact whether or not the business proposition is good," Chanos said.
The stock had also taken a beating in May, when the company accelerated another share buyback program after influential short-seller David Einhorn questioned the composition of its distributor network.
The company hosted an analyst day earlier this month. Several analysts called the presentation positive and affirmed their "buy" ratings on the stock.
Herbalife, which will report results on Feb. 19, expects fourth-quarter earnings to rise to between $1.02 and $1.05 per share, from 86 cents per share a year earlier.
Analysts on average were expecting $1.01 per share, according to Thomson Reuters I/B/E/S.
Sales are expected to rise about 20 percent.
The company said on Dec. 24 that it was yet to use $950 million of its authorized $1 billon share buyback program due to some trading restrictions.
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