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Factors to Consider as Medifast (MED) Gears Up for Q3 Earnings

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Medifast, Inc. (MED - Free Report) is likely to display year-over-year growth in the top and bottom lines, when it reports third-quarter 2021 earnings on Nov 4. The Zacks Consensus Estimate for revenues is pegged at $408 million, suggesting a rise of 50.2% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for quarterly earnings has remained stable over the past 30 days at $2.92 per share, which indicates an increase of 0.3% from the figure reported in the prior-year period. In the last reported quarter, the company delivered an earnings surprise of 20%. The company has a trailing four-quarter earnings surprise of nearly 16%, on average.

MEDIFAST INC Price, Consensus and EPS Surprise

MEDIFAST INC Price, Consensus and EPS Surprise

MEDIFAST INC price-consensus-eps-surprise-chart | MEDIFAST INC Quote

Key Factors to Note

Medifast has been gaining on strength in its OPTAVIA lifestyle solution and coaching support system, backed by consumers’ rising inclination toward health. OPTAVIA combines scientifically-proven programs, effective products as well as guidance from its coaches to help consumers lead a healthier lifestyle. The OPTAVIA product line is sold through its community of independent coaches, who offer support and guidance to their clients. In fact, Medifast’s second-quarter 2021 performance can be attributed to exceptional growth at its independent OPTAVIA Coaches, which reached new highs, as well as the efforts to improve the productivity of these Coaches. The relevance of the company’s offerings amid an environment where consumers are choosing health and wellness options has been an upside.

Apart from this, the company has been speeding up its long-term supply-chain efforts. To this end, Medifast is focused on optimizing and increasing capacity by strengthening its network of co-manufacturers. Moreover, the company is focused on making technological investments, as part of which it opened a new technology center in Utah in the beginning of 2020. We note that OPTAVIA Coaches have been focused on utilizing technology, including the company’s own app-based platforms, along with social media channels and field-led training platforms. The company’s constant investments in digital tools as well as in its new, fully integrated mobile apps help enhance the connection between clients and coaches.

That said, Medifast has been seeing high SG&A expenses for a while now, mainly due to the higher OPTAVIA commission costs. The company expects the SG&A expenses to shoot up in third-quarter 2021 as it returns to an in-person convention in the said quarter. The company, on its second-quarter earnings call, said that it predicts the demand for OPTAVIA-branded products to accelerate in the quarters ahead. This, however, is likely to exert some pressure on the gross margin through the rest of 2021, given the planned higher-level use of co-manufacturers. The company also anticipates elevated levels of inflation in raw ingredients, freight and labor costs, which might add to the pressures on the gross margin in the second half of 2021.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Medifast this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Medifast currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Tyson Foods (TSN - Free Report) has an Earnings ESP of +19.13% and carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coty Inc. (COTY - Free Report) has an Earnings ESP of +50.00% and carries a Zacks Rank of 3, currently.

Hormel Foods (HRL - Free Report) has an Earnings ESP of +1.59% and currently holds a Zacks Rank #3.


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