Twinlab Deenergized... Again
Nutritional product maker Twinlab Corp. (Nasdaq:TWLB - news)
burnt off 30% of its value this morning, falling $2 7/8 to $6 5/8 after
announcing earnings below expectations for 1998, a restatement of
earnings for the prior three quarters, and projections that the first
quarter of 1999 would fall "significantly" short of last year's
(restated lower) first quarter. Talk about an unhealthy way to wake
up in the morning. The restatement of the prior quarters results
related "irrevocable, unconditional, bona fide sales orders that were
received within a quarter but not completely shipped before the end
of the quarter." The company is adjusting its shipping and
accounting practices to avoid such problems in the future.
Prior to this morning, the First Call consensus earnings estimate for
1998 and 1999 were $1.16 and $1.38, respectively. As it turns out,
1998 earnings per share came in at $1.10 and, according to Ross
Blechman, company CEO, "it now appears that earnings for [1999]
will not reach 1998 levels." Those estimates for future years will
start tumbling quickly.
Investors have been shying away from nutritional supplement
makers for several months. Last year, Twinlab competitors
General Nutrition Co. (Nasdaq:GNCI - news) and Rexall
Sundown (Nasdaq:RXSD - news) had earnings problems as
inventories rose and competition intensified. Competitive pressures
have obviously traversed the industry. Since its high of $47 7/8 last
July, Twinlab has fallen over 80%.
For long-term investors, substantial value no doubt exists in some of
these companies. Our nation's aging population and the increasing
popularity of nutritional supplements are powerful secular trends.
All of the industry players (over)predicted this growth, however,
and supply increased much faster than demand, resulting in the
current industry woes.
While I'm a proponent of buying into great companies when they're
down, investors may want to wait for some good financial news to
emerge from these companies before throwing down money. You
won't get into a stock at its bottom using this strategy, but you could
avoid a substantial further decline. Just ask the people who bought
Twinlab last October at $25 after a one week decline of 30%. |
