Nature's Sunshine (NASDAQ:NATR) Misses Q4 Sales Targets

Jabin Bastian /
2024/03/12 4:17 pm EDT

Wellness products company Nature’s Sunshine Products (NASDAQ:NATR) fell short of analysts' expectations in Q4 FY2023, with revenue up 6% year on year to $108.9 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $467.5 million at the midpoint. It made a non-GAAP profit of $0.45 per share, improving from its profit of $0.10 per share in the same quarter last year.

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Nature's Sunshine (NATR) Q4 FY2023 Highlights:

  • Revenue: $108.9 million vs analyst estimates of $111.1 million (1.9% miss)
  • EPS (non-GAAP): $0.45 vs analyst estimates of $0.15 ($0.30 beat)
  • Management's revenue guidance for the upcoming financial year 2024 is $467.5 million at the midpoint, in line with analyst expectations and implying 5% growth (vs 5.7% in FY2023)
  • Gross Margin (GAAP): 71.9%, in line with the same quarter last year
  • Free Cash Flow of $8.35 million, down 15.5% from the previous quarter
  • Market Capitalization: $328.9 million

“The positive momentum in our business continued in the fourth quarter as sales increased 6.0%, with double-digit sales growth in North America and a more than tripling of our net income to $9 million,” said CEO Terrence Moorehead.

Started on a kitchen table in Utah, Nature’s Sunshine Products (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

Nature's Sunshine is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 5% over the last three years was weak for a consumer staples business.

Nature's Sunshine Total Revenue

This quarter, Nature's Sunshine's revenue grew 6% year on year to $108.9 million, missing Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 4.3% over the next 12 months, a deceleration from this quarter.

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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's free cash flow came in at $8.35 million in Q4, up 1,132% year on year. This result represents a 7.7% margin.

Nature's Sunshine Free Cash Flow Margin

Over the last eight quarters, Nature's Sunshine has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 2.7%, subpar for a consumer staples business. However, its margin has averaged year-on-year increases of 8.5 percentage points over the last 12 months. Continued momentum should improve its cash flow prospects.

Key Takeaways from Nature's Sunshine's Q4 Results

We were impressed by how significantly Nature's Sunshine blew past analysts' EPS expectations this quarter. We were also excited its operating margin outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed, but we still think this was a really good quarter that should please shareholders, especially considering its full-year 2024 EBITDA guidance topped Wall Street's projections. The stock is up 1% after reporting and currently trades at $17.34 per share.

Nature's Sunshine may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.