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Medifast (MED) Tops Q1 Earnings & Sales Estimates, Raises View

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Medifast, Inc. (MED - Free Report) delivered splendid first-quarter 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. Net revenues and earnings increased year over year. Strength in OPTAVIA remained a key driver with record numbers of independent, active earning OPTAVIA coaches and higher average revenue per active earning OPTAVIA coach.

Medifast is focused on using technological innovation and infrastructure to improve efficiency. We note that consumers’ increased inclination toward health and a solid OPTAVIA coach-based model have been helping Medifast draw new clients.

Courtesy of solid performance in the first quarter coupled with an impressive outlook for the remaining part of the year, management raised its 2022 revenue and earnings per share (EPS) guidance.

MEDIFAST INC Price and EPS Surprise

 

MEDIFAST INC Price and EPS Surprise

MEDIFAST INC price-eps-surprise | MEDIFAST INC Quote

 

Quarterly Highlights

Medifast posted earnings of $3.59 per share, which surpassed the Zacks Consensus Estimate of $3.56 and increased 3.8% on a year-over-year basis.

Net revenues of $417.6 million soared 22.6% year over year, mainly reflecting an increased number of active earning OPTAVIA Coaches and greater productivity per active earning OPTAVIA Coach. The metric beat the Zacks Consensus Estimate of $415.2 million.

The total number of active earning OPTAVIA Coaches rose 21.7% year over year to 63,900. The average revenue per active earning OPTAVIA Coach was $6,536, up 1.3% from $6,454 reported in the year-ago quarter. Management highlighted that it is impressed with coach growth and productivity gains, fueled by continued growth in the number of customers supported by each coach and higher average customer spend.

Gross profit rose 21.6% to $302.3 million, mainly owing to increased revenues. Gross profit, as a percentage of revenues, came in at 72.4%, down from 73% reported in first-quarter 2021. The downside can be attributed to a customer acquisition program as well as increased product and shipping costs stemming from inflation in raw ingredient costs and freight and labor expenses.

Selling, general, and administrative expenses (SG&A) came in at $247.2 million, up 26.3% year over year. The increase in SG&A expenses was mainly led by higher OPTAVIA Coach compensation expenses, escalated salaries and benefits-related expenses for employees, additional costs associated with continued investment in information technology and distribution infrastructure and a rise in credit card fees. As a percentage of revenues, SG&A expenses expanded 170 basis points to 59.2%.

Income from operations rose 4.3% to $55.1 million. As a percentage of revenue, income from operations fell from 15.5% to 13.2% year over year.

Other Financial Updates

The Zacks Rank #3 (Hold) company concluded the first quarter with cash, cash equivalents and investment securities of $122.1 million and total shareholders’ equity of $216 million. Management did not have any interest-bearing debt on its balance sheet as of Mar 31, 2022.

The company paid a quarterly cash dividend worth $16.7 million on Feb 8, 2022. Medifast declared a quarterly cash dividend of $1.64 per share, payable on May 9, 2022. During the quarter, the company utilized $10 million to repurchase 50,464 shares. As of Mar 31, 2022, the company has nearly 2 million shares under its stock repurchase program.

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Outlook

Management anticipates 2022 revenues in the range of $1.78-$1.84 billion. Earlier, the company expected revenues in the range of $1.72-$1.79 billion. Revenues came in at $1.5 billion in 2021.

The company expects 2022 EPS in the band of $14.60-$16.05, up from the earlier guidance of $14.50-$16. The company posted an EPS of $13.89 in 2021.

Medifast’s shares have declined 2% in the past three months against the industry’s growth of 0.9%.

3 Hot Staple Bets

Some better-ranked stocks are Inter Parfums, Inc. (IPAR - Free Report) , McCormick & Company (MKC - Free Report) and Sysco Corporation (SYY - Free Report) .

Inter Parfums develops, manufactures and distributes prestige perfumes and cosmetics. It currently carries a Zacks Rank #2 (Buy). Inter Parfums has a trailing four-quarter earnings surprise of 46.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for IPAR’s current financial year sales and EPS suggests growth of 12.5% and 10.9%, respectively, from the year-ago period’s figures.

McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It presently carries a Zacks Rank #2.

The Zacks Consensus Estimate for McCormick's current financial year sales and EPS suggests growth of 5% and 3.9%, respectively, from the year-ago period’s reported figures. MKC has a trailing four-quarter earnings surprise of 7.3%, on average.

Sysco, the marketer and distributor of food and related products, currently carries a Zacks #2. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.

The Zacks Consensus Estimate for Sysco’s current financial year sales and earnings suggests growth of 30.4% and 120.1%, respectively, from the corresponding year-ago period’s reported figures.