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Medifast (MED) Down More Than 20% in 3 Months on Cost Woes
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Medifast, Inc. (MED - Free Report) looks troubled by elevated costs. The company has been seeing high SG&A expenses for a while now, mainly due to higher OPTAVIA commission costs. Also, escalated raw material costs are hurting the gross margin. These headwinds were visible in the company’s second-quarter 2022 results, wherein management curtailed its guidance for 2022. Let’s delve deeper.
Shares of this Zacks Rank #5 (Strong Sell) company have slumped 23.7% in the past three months against the industry’s growth of 1.8%.
High Costs
In the second quarter of 2022, adjusted SG&A expenses came in at $263.3 million, up $31 million year over year. The increase was mainly led by escalated OPTAVIA Coach compensation expenses, additional costs associated with continued investments in information technology and distribution infrastructure and a rise in credit card fees. Management expects increased SG&A expenses in the third quarter.
Medifast’s gross margin has been contracting year over year for the past few quarters now. In the second quarter of 2022, Medifast’s gross profit, as a percentage of revenues, came in at 71%, down from the 74.5% reported in the second quarter of 2021. The downside can be attributed to a customer acquisition program and increased product costs stemming from inflation in raw ingredient costs. The adjusted income from operations declined $3 million to $58.4 million. As a percentage of revenues, the metric fell 270 basis points to 12.9% year over year.
On its second-quarter 2022 earnings call, management stated that it expects short-term margin pressure in 2022 due to inflation and continued investments related to technology and supply-chain infrastructure.
Image Source: Zacks Investment Research
A Look at Q2 Earnings & Ahead
MED posted second-quarter 2022 earnings of $3.87 per share, which declined 2.5% on a year-over-year basis. This can be attributed to escalated costs. Management curtailed its 2022 guidance due to macroeconomic factors like raw material and transportation cost inflation and consumer sentiment that have affected customer retention. This is likely to deliver slower-than-anticipated growth in the second half of 2022.
Management anticipates 2022 revenues in the range of $1.58-$1.66 billion. Earlier, the company expected revenues in the range of $1.78-$1.84 billion. Revenues came in at $1.5 billion in 2021. The company expects 2022 adjusted earnings per share (EPS) in the band of $12.7-$14.1, lower than the earlier guidance in the band of $14.60-$16.05. The company posted an EPS of $13.89 in 2021.
While strength in Medifast’s OPTAVIA lifestyle solution and coaching support system bodes well, the abovementioned obstacles cannot be ignored in the near term.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 355.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales suggests growth of 40.7% from the year-ago reported number.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 6.5%, on average.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and EPS suggests growth of almost 2% and 1.5%, respectively, from the corresponding year-ago reported figures.
Celsius Holdings, which develops, processes, markets, distributes and sells functional drinks and liquid supplements, carries a Zacks Rank #2 at present. Celsius Holdings delivered an earnings surprise of 50% in the last reported quarter.
The Zacks Consensus Estimate for CELH’s current financial-year sales suggests growth of 97.3% from the year-ago period’s reported figure.
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Medifast (MED) Down More Than 20% in 3 Months on Cost Woes
Medifast, Inc. (MED - Free Report) looks troubled by elevated costs. The company has been seeing high SG&A expenses for a while now, mainly due to higher OPTAVIA commission costs. Also, escalated raw material costs are hurting the gross margin. These headwinds were visible in the company’s second-quarter 2022 results, wherein management curtailed its guidance for 2022. Let’s delve deeper.
Shares of this Zacks Rank #5 (Strong Sell) company have slumped 23.7% in the past three months against the industry’s growth of 1.8%.
High Costs
In the second quarter of 2022, adjusted SG&A expenses came in at $263.3 million, up $31 million year over year. The increase was mainly led by escalated OPTAVIA Coach compensation expenses, additional costs associated with continued investments in information technology and distribution infrastructure and a rise in credit card fees. Management expects increased SG&A expenses in the third quarter.
Medifast’s gross margin has been contracting year over year for the past few quarters now. In the second quarter of 2022, Medifast’s gross profit, as a percentage of revenues, came in at 71%, down from the 74.5% reported in the second quarter of 2021. The downside can be attributed to a customer acquisition program and increased product costs stemming from inflation in raw ingredient costs. The adjusted income from operations declined $3 million to $58.4 million. As a percentage of revenues, the metric fell 270 basis points to 12.9% year over year.
On its second-quarter 2022 earnings call, management stated that it expects short-term margin pressure in 2022 due to inflation and continued investments related to technology and supply-chain infrastructure.
Image Source: Zacks Investment Research
A Look at Q2 Earnings & Ahead
MED posted second-quarter 2022 earnings of $3.87 per share, which declined 2.5% on a year-over-year basis. This can be attributed to escalated costs. Management curtailed its 2022 guidance due to macroeconomic factors like raw material and transportation cost inflation and consumer sentiment that have affected customer retention. This is likely to deliver slower-than-anticipated growth in the second half of 2022.
Management anticipates 2022 revenues in the range of $1.58-$1.66 billion. Earlier, the company expected revenues in the range of $1.78-$1.84 billion. Revenues came in at $1.5 billion in 2021. The company expects 2022 adjusted earnings per share (EPS) in the band of $12.7-$14.1, lower than the earlier guidance in the band of $14.60-$16.05. The company posted an EPS of $13.89 in 2021.
While strength in Medifast’s OPTAVIA lifestyle solution and coaching support system bodes well, the abovementioned obstacles cannot be ignored in the near term.
Consumer Staple Stocks Worth a Look
Some better-ranked stocks are The Chef's Warehouse (CHEF - Free Report) , General Mills, Inc. (GIS - Free Report) and Celsius Holdings (CELH - Free Report) .
Chef’s Warehouse, a distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 355.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales suggests growth of 40.7% from the year-ago reported number.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 6.5%, on average.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and EPS suggests growth of almost 2% and 1.5%, respectively, from the corresponding year-ago reported figures.
Celsius Holdings, which develops, processes, markets, distributes and sells functional drinks and liquid supplements, carries a Zacks Rank #2 at present. Celsius Holdings delivered an earnings surprise of 50% in the last reported quarter.
The Zacks Consensus Estimate for CELH’s current financial-year sales suggests growth of 97.3% from the year-ago period’s reported figure.