Medifast's (MED) Holistic Health Solution, Innovation Bode Well
Medifast, Inc.’s MED focus on a comprehensive lifestyle plan is key to its business philosophy. This approach includes personalized coaching, community support and promoting healthy habits alongside balanced meals. By offering a holistic health solution, Medifast seeks to differentiate itself from conventional diet-centric programs.
This holistic approach not only aligns with the current wellness trends but also enhances client engagement and retention. Medifast's collaboration with telehealth companies represents a strategic approach to its weight loss solutions.
Integrating weight loss medication into its coaching model is an innovative step in the health and wellness industry. This initiative will enhance the company's appeal to a broader range of customers who are seeking comprehensive weight loss solutions.
Additionally, the company is working to reach out to the U.S. Hispanic community by translating its materials into Spanish and trying out Spanish-language ads. This shows the importance of connecting with different cultures and languages. This effort will help the company attract more customers from this group and help them stay loyal to its brand.
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Fuel for the Future Program Bodes Well
Medifast's Fuel for the Future program aims to make its operations more efficient. This includes improving the supply chain, making its manufacturing better and cutting costs by combining facilities and upgrading IT systems. The company is also investing in new technology and analyzing data better.
The goal of this program is to not only make more profit but also to help the company grow steadily in the future. As a result of this program, the gross margin went up to 75.2% in the third quarter of 2023 from 72.5% reported in the year-ago quarter.
As Medifast moves into the fourth quarter, it continues to focus on various growth initiatives supported by the strong financial foundation established by the Fuel for the Future program.
OPTAVIA ACTIVE Line, Another Key Factor
The introduction of the OPTAVIA ACTIVE line marks Medifast's strategic expansion into the sports nutrition market. Understanding the rising demand for weight loss medications, Medifast is strategically aligning itself to integrate medical weight loss solutions into its product range.
Technological innovation plays a pivotal role in Medifast's growth strategy, with OPTAVIA Coaches leveraging proprietary app-based platforms, social media channels and field-led training platforms. Ongoing investments in digital tools and fully integrated mobile apps aim to enhance the connection between clients and coaches, increase efficiencies and enable OPTAVIA Coaches to cater to a broader clientele.
Cost & Customer Acquisition Hurdles
The company struggles with customer acquisition, attributed to macroeconomic factors like economic shifts, inflation, altered social media algorithms and heightened competition. In the third quarter of 2023, net revenues plummeted 39.6% year over year to $235.9 million due to a decline in active earning OPTAVIA Coaches and reduced productivity per coach.
Also, as a percentage of revenues, SG&A expenses increased 430 basis points to 64.4% in the third quarter of 2023, primarily driven by the lack of leverage on fixed costs resulting from lower sales volumes in comparison with 2022.
The company expects earnings per share (EPS) of $8.65-$9.55 for 2023. In 2022, Medifast delivered earnings of $12.73 per share, whereas its adjusted EPS was $14.50.
Shares of this Zacks Rank #3 (Hold) company’s shares have lost 28.3% in the past six months compared with the industry’s 9.4% decline.
Key Picks
We have highlighted three better-ranked stocks, namely MGP Ingredients, Inc. MGPI, Ingredion Incorporated INGR and The Kraft Heinz Company KHC.
MGP Ingredients produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and EPS suggests growth of 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2%, on average.
Ingredion, an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients, currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Ingredion’s current financial-year sales and earnings suggests growth of 5% and 24.7%, respectively, from the year-ago reported numbers. INGR has a trailing four-quarter earnings surprise of 23.9%, on average.
The Kraft Heinz Company is one of the largest consumer packaged food and beverage companies. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for The Kraft Heinz Company’s current financial-year sales and earnings suggests growth of 1% and 6.5%, respectively, from the year-ago reported numbers. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
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Ingredion Incorporated (INGR) : Free Stock Analysis Report
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MGP Ingredients, Inc. (MGPI) : Free Stock Analysis Report
