Herbalife Ltd., the Los Angeles nutrition company that has fought critics saying it operates an illegal pyramid scheme, reported surprisingly strong results for the first three months of the year.
The news drove the company's stock up as much as 15% in after-hours trading.
Herbalife reported adjusted first-quarter earnings Tuesday of $109 million, or $1.29 a share, down from $151 million, or $1.50, in the same period last year. Analysts had expected earnings of $1.01 a share, which the company easily beat.
Herbalife also raised its profit forecast for the year.
“Our performance this quarter was above our expectations and has resulted in us increasing our full-year 2015 guidance,” Herbalife Chief Executive Michael O. Johnson said in a news release.
Herbalife announced the results after the U.S. stock markets closed Tuesday. Its stock fell $1.98, or 5%, to $40.09 during regular trading, but surged in the after-hours market.
Herbalife, which sells its products in more than 90 countries, has been hurt by foreign currency exchange rates. It also has limited the amount of products its members can order initially, straining sales.
The company said its revenue fell 12% in the quarter to $1.1 billion, down from $1.26 billion a year earlier.
One factor in its performance is an ongoing investigation of its business model by the Federal Trade Commission; the probe has lasted more than a year and there's no indication of when it might end.
Herbalife disclosed Tuesday in its quarterly filing with the Securities and Exchange Commission that it had also been contacted by the Justice Department concerning allegations about its business practices. The Times reported a year ago that the investigation was underway.
“Consistent with its policies, the company has cooperated and will continue to fully cooperate with any governmental or regulatory inquiries or investigations,” Herbalife said in the filing.
In December 2012, hedge fund manager Bill Ackman accused the company of operating a pyramid scheme in the way it pays its independent sales people and predicted that regulators would ultimately shut down the company. He announced that he had shorted the company's stock by more than $1 billion, betting that the stock price would fall.
Ackman said most Herbalife distributors lose money trying to sell its meal-replacement shake mixes, vitamins, teas and personal care products, while a fortunate few get rich from recruiting others into the business.
The 35-year-old company has denied those allegations, saying its business practices are legal and employed by many other multilevel marketing companies. Herbalife launched a massive ad campaign this year to sway consumer confidence in its model.