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Bull of the Day: Weight Watchers (WTW)

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Weight Watchers (WTW - Free Report) announced last week that the company changed its name to WW, in the latest move to distance itself from a diet firm. Beyond the simple rebrand, Weight Watchers has already expanded its offerings to become a more complete wellness company and looks poised to continue to grow, while expanding its earnings.

Overview & Recent News

Along with its new WW name, the firm will adopt a new marketing tagline, “Wellness that Works.” The New York-based company, which boasts Oprah Winfrey as a major shareholder and one of its biggest ambassadors, has slowly moved beyond a weight loss firm into the broader health and wellness industry.

“We are becoming the world's partner in wellness,” CEO Mindy Grossman said in a statement. “No matter what your goal is – to lose weight, eat healthier, move more, develop a positive mind-set, or all of the above – we will deliver science-based solutions that fit into people's lives.”

Weight Watchers’ CEO told analysts in February that the “world doesn’t need another diet.” Not to long after that, the company unveiled its new WW Healthy Kitchen line of kitchen tools and products, which are set to hit retail stores by the end of 2018. Meanwhile, the firm announced new WW branded meal-prep kits that are expected to launch at some point this year to compete against Blue Apron (APRN - Free Report) , Albertson’s Plated, Kroger’s (KR - Free Report) Home Chef, and others.

Looking ahead, the firm is ready to infuse voice assistant technology from Google (GOOGL - Free Report) and Amazon (AMZN - Free Report) into its app. The Weight Watchers app, which will become the WW app, allows users to track their fitness goals, find workouts geared toward them, search for WW recipes, and more. The firm also plans to roll out WellnessWins, a new program that will reward members for “small, everyday behaviors that are proven to lead to healthier habits.”

Plus, Weight Watchers’ second quarter revenues jumped 20% to $410 million, while its total subscribers climbed by 28% to 4.5 million.

Price Movement

Now let’s look at how Weight Watchers stock has performed to help give investors a better understanding of where the company stands at the moment. Shares of WTW are up roughly 92% over the last five years, which tops its industry’s 81% average. Yet, most of these gains have come over the last 36 months, with Weight Watchers stock up 1,012%. This destroys its industry’s 48% climb and the S&P 500’s 47%.

 

 

Investors should note that shares of WTW have cooled off recently, up 65% since the start of the year. After the roughly two and a half years of massive upward movement, shares of Weight Watchers are down nearly 30% in the last three months, which sets up a solid buying opportunity based on its growth projections and overall wellness expansion.

Outlook

Looking ahead to the third quarter, Weight Watchers’ revenues are projected to climb 17.3% to hit $379.84 million, based on our current Zacks Consensus Estimates. Meanwhile, the company’s full-year revenues are expected to reach $1.56 billion, which would mark a 19.7% surge.  

Yet, investors might be more pleased with and impressed by Weight Watchers’ bottom line outlook. The firm’s adjusted Q3 earnings are projected to soar 52.3% to hit $0.99 per share. Maybe more impressively and importantly, WTW’s adjusted full-year EPS figure is expected to skyrocket over 80% to $2.98.

Bottom Line

Weight Watchers has earned six upward earnings estimate revisions for its current fiscal year over the last 60 days, against zero downward changes. Plus, WTW earned three revisions during this same period for its following fiscal year, with 100% agreement to the upside. The company has also topped our quarterly earnings estimates for eight straight periods.

The health and wellness company that will soon go by WW currently boasts a Zacks Rank #1 (Strong Buy) based on its positive earnings estimate revision activity. Weight Watchers also rocks an “A” grade for Growth in our Style Scores system.

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