Medifast (MED) Cuts View Despite Q3 Earnings Beat, Stock Down
Medifast, Inc. MED delivered soft third-quarter 2022 results as both the top and bottom lines declined year over year. Results were hurt by reduced Coach productivity and cost inflation. Management lowered its guidance for 2022. Shares of the company tumbled 6.6% in the after-market trading session on Nov 3.
Quarterly Highlights
Medifast posted adjusted earnings of $3.32 per share, which easily surpassed the Zacks Consensus Estimate of $1.91. The company’s earnings per share (EPS) came in at $3.56 in the third quarter of 2021.
MEDIFAST INC Price, Consensus and EPS Surprise
MEDIFAST INC price-consensus-eps-surprise-chart | MEDIFAST INC Quote
Net revenues of $390.4 million declined 5.6% year over year due to reduced Coach productivity. The total number of active earning OPTAVIA Coaches rose 8.5% year over year to 66,200. The average revenue per active earning OPTAVIA Coach was $5,897 compared with $6,773 reported in the year-ago quarter.
The gross profit fell 7.9% to $282.8 million, mainly due to a decline in the number of customers supported by each Coach and escalated product costs resulting from increased raw ingredient, shipping and labor costs. The gross profit, as a percentage of revenues, came in at 72.5%, down from the 74.3% reported in the third quarter of 2021.
Adjusted SG&A expenses came in at $233.6 million, down 7.3% year over year. As a percentage of revenues, adjusted SG&A expenses contracted 110 basis points (bps) to 59.8%.
The adjusted income from operations declined 10.7% to $49.2 million. As a percentage of revenues, the metric fell 70 bps to 12.6% year over year.
Other Financial Updates
This Zacks Rank #2 (Buy) company concluded the quarter with cash, cash equivalents and investment securities of $69.7 million, no interest-bearing debt (as of Sep 30) and total shareholders’ equity of $150.5 million.
The company declared a quarterly cash dividend of $1.64 per share, payable on Nov 8, 2022, to shareholders of record as of Sep 20.
Guidance
Management curtailed its 2022 guidance due to the impact of macroeconomic volatility and increased inflation in customer acquisition.
Management anticipates 2022 revenues in the range of $1.51-$1.59 billion. Earlier, MED expected revenues in the range of $1.58-$1.66 billion. Revenues came in at $1.5 billion in 2021.
The company expects the 2022 adjusted EPS in the band of $11.61-$13.05, lower than the earlier guidance in the band of $12.70-$14.10. The company posted an EPS of $13.89 in 2021.
Medifast shares have declined 30.2% in the past three months compared with the industry’s dip of 1%.
Other Staple Stocks to Consider
Some other top-ranked stocks from the sector are Lamb Weston LW, TreeHouse Foods THS and Conagra Brands CAG.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.6% and 45.7%, respectively, from the year-ago reported numbers.
TreeHouse Foods, which manufactures and distributes private label food and beverages, sports a Zacks Rank #1 at present. TreeHouse Foods has a trailing four-quarter earnings surprise of 45.2%, on average.
The Zacks Consensus Estimate for THS’ current financial-year sales and earnings suggests growth of 16.8% and 15.1%, respectively, from the year-ago reported numbers.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank of 2. CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial-year sales and EPS suggests growth of 5.2% and around 3%, respectively, from the corresponding year-ago reported figures.
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