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What's in Store for Weight Watchers' (WTW) Q3 Earnings?

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What's in Store for Weight Watchers' (WTW) Q3 Earnings?

Weight Watchers (WTW) likely to see soft segmental revenues in Q3; EPS guidance raised.

Weight Watchers International, Inc.’s WTW, also known as WW, third-quarter 2018 earnings are scheduled to release on Nov 1, after market close.

While the company’s core Services revenues are likely to see some softness in the third quarter, raised earnings per share (EPS) guidance for 2018 is encouraging.

Q2 Results at a Glance

In the last reported quarter, WW posted EPS of $1.01 which surpassed the Zacks Consensus Estimate by 12.2%. The company also reported revenues of $409.7 million, which missed the Zacks Consensus Estimate of $412 million.

The company has a positive average earnings surprise of 120.9% for the trailing four quarters.

Which Way Are Estimates Treading?

For the quarter to be reported, the Zacks Consensus Estimate for WW’s EPS is pegged at 99 cents, showing a year-over-year increase of 52.3%. The same for revenues stands at $379.7 million, reflecting an increase of 17.3% year over year.

Weight Watchers International Inc Price and EPS Surprise

 

Weight Watchers International Inc Price and EPS Surprise | Weight Watchers International Inc Quote

WW reports through two major segments — Service and Product sales and other.

Service Revenues Likely to be Soft in Q3

The company’s services include a range of nutritional, activity, behavioral and lifestyle tools and approaches that can be personalized. Platforms like, SmartPoints, Freestyle and WW Good are expected to drive the results this season. Per management, the Weight Watchers App ended the second quarter with 4.5 million subscribers. Furthermore, WW has introduced the beta version of Headspace as an exclusive content to the WW App for its U.S. customers.

In the last reported quarter, the segment contributed 83.9% to WW’s net sales. Revenues in the segment grossed $343.7 million, which saw a year-over-year rise of 21.4%.

However, for the quarter to be reported, the Zacks Consensus Estimate for the segment’s revenues is pinned at $328 million, showing a sequential decline.

Other Factors at Play

Product Sales

WW offers a wide spectrum of products like bars, snacks, cookbooks, food and restaurant guides with SmartPoints values, Weight Watchers magazines, etc.

In the last reported quarter, the segment contributed 16.1% to WW’s net revenues. Sales in the segment totaled $66 million, up 12.4% year over year.

For the third quarter of 2018, the Zacks Consensus Estimate for the segment’s revenues stands at $54 million, reflecting a sequential fall. However, it is encouraging to note that WW is working toward enhancing customer experience. For instance, management declared that by early 2019, there will be no artificial ingredients in any products that are sold directly to customers.

Furthermore, WW is working with FreshRealm with a view to launch WW Fresh quick prep food portion meal kits and individual fresh food products.

EPS Guidance Raised

WW raised its 2018 EPS guidance to the range of $3.10 to $3.25. Notably, the Zacks Consensus Estimate is pegged at $2.98, below the guided range.

Additionally, the company expects full-year revenues to be slightly above $1.55 billion. The Zacks Consensus Estimate stands at $1.56 billion.

Notably, WW joined the S&P MidCap 400 index last month.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. This is precisely the case here.

Earnings ESP: WW has an Earnings ESP of +1.01%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: WW carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as they also have the right combination of elements to post an earnings beat this quarter.

PerkinElmer PKI has an Earnings ESP of +1.45% and a Zacks Rank #3.

Becton, Dickinson and Company BDX has an Earnings ESP of +0.43% and a Zacks Rank #3.

Baxter International BAX has an Earnings ESP of +0.90% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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