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Medifast (MED) Down 8.2% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Medifast (MED - Free Report) . Shares have lost about 8.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Medifast due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Medifast's Q1 Earnings Top Estimates, Sales Decline Y/Y
Medifast delivered first-quarter 2023 results, with the bottom-line increasing year over year and beating the Zacks Consensus Estimate. However, the top line declined year over year.
Quarterly Highlights
Medifast’s adjusted earnings came in at $3.67 per share, up from $3.59 million reported in the year-ago quarter. The metric surpassed the Zacks Consensus Estimate of $2.40 and our estimate of $2.12 a share.
Net revenues of $349 million declined 16.4% year over year mainly due to the reduced number of active earning OPTAVIA Coaches and lesser Coach productivity relative to the year-ago quarter. The average revenue per active earning OPTAVIA Coach stood at $5,945, down 9% from $6,536 million thanks to persistent pressure on customer acquisition. The total number of independent active earning OPTAVIA Coaches fell 8.1% to 58,700 compared with 63,900 reported in the year-ago quarter. The top line surpassed our estimate of $314.7 million.
The gross profit came in at $246.4 million, down 18.5% year over year on reduced revenues and higher cost inflation in raw ingredients, shipping and labor. Gross profit margin was 70.6%, down from 72.4% reported in the prior-year quarter on product cost inflation among other reasons.
Selling, general and administrative expenses (SG&A) fell 22% year over year to $192.9 million. As a percentage of revenues, SG&A expenses contracted 390 basis points (bps) to 55.3%. The reduction in SG&A expenses is a result of progress on various cost reduction and optimization efforts and lower coach compensation, stemming from reduced sales volumes and lesser active earning coaches.
The income from operations declined 2.9% to $53.5 million. As a percentage of revenues, the metric increased 210 bps to 15.3%.
Other Financial Updates
Medifast concluded the quarter with cash and cash equivalents of $123.7 million, no interest-bearing debt (as of Mar 31, 2023) and total shareholders’ equity of approximately $170.9 million.
The company declared a quarterly cash dividend of $1.65 per share, payable on May 9, 2023, to shareholders of record as of Mar 28.
Guidance
Management expects second-quarter 2023 revenues in the range of $250-$270 million. The company expects EPS in the range of $1.32-$1.44 for the second quarter. The company assumes that the effective tax rate to be between 24.50% and 26.25% in the second quarter of 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -55.83% due to these changes.
VGM Scores
Currently, Medifast has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Medifast has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Medifast (MED) Down 8.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Medifast (MED - Free Report) . Shares have lost about 8.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Medifast due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Medifast's Q1 Earnings Top Estimates, Sales Decline Y/Y
Medifast delivered first-quarter 2023 results, with the bottom-line increasing year over year and beating the Zacks Consensus Estimate. However, the top line declined year over year.
Quarterly Highlights
Medifast’s adjusted earnings came in at $3.67 per share, up from $3.59 million reported in the year-ago quarter. The metric surpassed the Zacks Consensus Estimate of $2.40 and our estimate of $2.12 a share.
Net revenues of $349 million declined 16.4% year over year mainly due to the reduced number of active earning OPTAVIA Coaches and lesser Coach productivity relative to the year-ago quarter. The average revenue per active earning OPTAVIA Coach stood at $5,945, down 9% from $6,536 million thanks to persistent pressure on customer acquisition. The total number of independent active earning OPTAVIA Coaches fell 8.1% to 58,700 compared with 63,900 reported in the year-ago quarter. The top line surpassed our estimate of $314.7 million.
The gross profit came in at $246.4 million, down 18.5% year over year on reduced revenues and higher cost inflation in raw ingredients, shipping and labor. Gross profit margin was 70.6%, down from 72.4% reported in the prior-year quarter on product cost inflation among other reasons.
Selling, general and administrative expenses (SG&A) fell 22% year over year to $192.9 million. As a percentage of revenues, SG&A expenses contracted 390 basis points (bps) to 55.3%. The reduction in SG&A expenses is a result of progress on various cost reduction and optimization efforts and lower coach compensation, stemming from reduced sales volumes and lesser active earning coaches.
The income from operations declined 2.9% to $53.5 million. As a percentage of revenues, the metric increased 210 bps to 15.3%.
Other Financial Updates
Medifast concluded the quarter with cash and cash equivalents of $123.7 million, no interest-bearing debt (as of Mar 31, 2023) and total shareholders’ equity of approximately $170.9 million.
The company declared a quarterly cash dividend of $1.65 per share, payable on May 9, 2023, to shareholders of record as of Mar 28.
Guidance
Management expects second-quarter 2023 revenues in the range of $250-$270 million. The company expects EPS in the range of $1.32-$1.44 for the second quarter. The company assumes that the effective tax rate to be between 24.50% and 26.25% in the second quarter of 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -55.83% due to these changes.
VGM Scores
Currently, Medifast has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Medifast has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.