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Medifast, Inc. (MED - Free Report) delivered fourth-quarter 2023 results, with the top and bottom lines declining year over year. However, both earnings and net revenues beat the Zacks Consensus Estimate.
Medifast is strategically adjusting its operations to meet the changing demands of the weight loss industry. This involves expanding its customer outreach through enhanced marketing efforts and entering the medically supported weight loss domain in partnership with LifeMD.
These steps are designed to increase its market presence and cater to a wider audience, highlighting a forward-looking approach aimed at driving growth and adapting to market dynamics despite the competitive landscape of the weight loss sector.
Medifast’s adjusted earnings were $1.09 per share in the fourth quarter of 2023, down from the $3.70 reported in the year-ago quarter. The metric surpassed the Zacks Consensus Estimate of 99 cents.
Net revenues of $191 million declined 43.4% year over year mainly due to lesser active earning OPTAVIA Coaches and reduced productivity per active earning OPTAVIA Coach. The average revenue per active earning OPTAVIA Coach stood at $4,648, down 16.1% from $5,538 million due to lower customer acquisition. The total number of active earning OPTAVIA Coaches fell 32.5% to 41,100 compared with 60,900 in the year-ago quarter. The top line surpassed the Zacks Consensus estimate of $174 million.
The adjusted gross profit came in at $141.4 million, down 42.5% year over year on reduced revenues. The adjusted gross profit margin was 74%, up 110 basis points year over year. This increase mainly resulted from the cost reductions achieved through the company's Fuel for the Future initiative, coupled with the lack of restructuring expenses that were present in the previous year's period.
Adjusted selling, general and administrative expenses (SG&A) fell 35% year over year to $125.1 million. The decrease was primarily attributed to several factors, including reduced Coach compensation due to lower sales volumes and fewer active earning Coaches, as well as the progress made in various cost reduction and optimization initiatives. Additionally, charitable donations made in 2022 contributed to the decrease.
As a percentage of revenues, adjusted SG&A expenses increased 840 basis points (bps) to 65.5%, primarily attributed to the reduced leverage on fixed costs resulting from decreased sales volumes, as well as costs associated with market research and investments in medically supported weight loss endeavors. This was somewhat mitigated by advancements in various cost reduction and optimization efforts, along with the impacts of charitable donations made in 2022. We expected adjusted SG&A expenses, as a percentage of revenues, to increase 760 bps to 64.7% in the fourth quarter.
The adjusted income from operations declined 69.5% to $16.2 million mainly due to a decrease in gross profit. However, this was partially mitigated by reduced SG&A expenses. The adjusted operating margin decreased 730 basis points year over year to 8.5%.
Image Source: Zacks Investment Research
Other Financial Updates
Medifast concluded the quarter with cash, cash equivalents and investments of $150 million, no interest-bearing debt (as of Dec 31, 2023), and total shareholders’ equity of $201.5 million.
Guidance
Management expects revenues of $155-$175 million for first-quarter 2024. The company expects adjusted earnings per share (EPS) of 25-35 cents for the first quarter.
In 2023, revenues fell 32.9% to $1.1 billion from $1.6 billion in 2022. Adjusted earnings declined 33.5% year over year to $9.64 per share.
The Zacks Rank #5 (Strongly Sell) company’s shares have lost 34% in the past three months against the industry’s 4.6% growth.
Some Better-Ranked Staple Bets
Here, we have highlighted three better-ranked stocks, namely Lamb Weston Holdings, Inc. (LW - Free Report) , Vital Farms Inc. (VITL - Free Report) and Inter Parfums, Inc. (IPAR - Free Report) .
Lamb Weston is a leading global manufacturer, marketer and distributor of value-added frozen potato products. It currently has a Zacks Rank #2 (Buy). LW has a trailing four-quarter earnings surprise of 28.8% on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the fiscal 2023 reported figures.
Vital Farms offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29% from the 2022 reported figure.
Inter Parfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. The company currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year earnings and sales indicates growth of 20.4% and 21.6%, respectively, from the 2022 reported figures. IPAR has a trailing four-quarter average earnings surprise of 45.7%.
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Medifast (MED) Q4 Earnings Beat Estimates, Revenues Dip Y/Y
Medifast, Inc. (MED - Free Report) delivered fourth-quarter 2023 results, with the top and bottom lines declining year over year. However, both earnings and net revenues beat the Zacks Consensus Estimate.
Medifast is strategically adjusting its operations to meet the changing demands of the weight loss industry. This involves expanding its customer outreach through enhanced marketing efforts and entering the medically supported weight loss domain in partnership with LifeMD.
These steps are designed to increase its market presence and cater to a wider audience, highlighting a forward-looking approach aimed at driving growth and adapting to market dynamics despite the competitive landscape of the weight loss sector.
MEDIFAST INC Price, Consensus and EPS Surprise
MEDIFAST INC price-consensus-eps-surprise-chart | MEDIFAST INC Quote
Q4 in Details
Medifast’s adjusted earnings were $1.09 per share in the fourth quarter of 2023, down from the $3.70 reported in the year-ago quarter. The metric surpassed the Zacks Consensus Estimate of 99 cents.
Net revenues of $191 million declined 43.4% year over year mainly due to lesser active earning OPTAVIA Coaches and reduced productivity per active earning OPTAVIA Coach. The average revenue per active earning OPTAVIA Coach stood at $4,648, down 16.1% from $5,538 million due to lower customer acquisition. The total number of active earning OPTAVIA Coaches fell 32.5% to 41,100 compared with 60,900 in the year-ago quarter. The top line surpassed the Zacks Consensus estimate of $174 million.
The adjusted gross profit came in at $141.4 million, down 42.5% year over year on reduced revenues. The adjusted gross profit margin was 74%, up 110 basis points year over year. This increase mainly resulted from the cost reductions achieved through the company's Fuel for the Future initiative, coupled with the lack of restructuring expenses that were present in the previous year's period.
Adjusted selling, general and administrative expenses (SG&A) fell 35% year over year to $125.1 million. The decrease was primarily attributed to several factors, including reduced Coach compensation due to lower sales volumes and fewer active earning Coaches, as well as the progress made in various cost reduction and optimization initiatives. Additionally, charitable donations made in 2022 contributed to the decrease.
As a percentage of revenues, adjusted SG&A expenses increased 840 basis points (bps) to 65.5%, primarily attributed to the reduced leverage on fixed costs resulting from decreased sales volumes, as well as costs associated with market research and investments in medically supported weight loss endeavors. This was somewhat mitigated by advancements in various cost reduction and optimization efforts, along with the impacts of charitable donations made in 2022. We expected adjusted SG&A expenses, as a percentage of revenues, to increase 760 bps to 64.7% in the fourth quarter.
The adjusted income from operations declined 69.5% to $16.2 million mainly due to a decrease in gross profit. However, this was partially mitigated by reduced SG&A expenses. The adjusted operating margin decreased 730 basis points year over year to 8.5%.
Image Source: Zacks Investment Research
Other Financial Updates
Medifast concluded the quarter with cash, cash equivalents and investments of $150 million, no interest-bearing debt (as of Dec 31, 2023), and total shareholders’ equity of $201.5 million.
Guidance
Management expects revenues of $155-$175 million for first-quarter 2024. The company expects adjusted earnings per share (EPS) of 25-35 cents for the first quarter.
In 2023, revenues fell 32.9% to $1.1 billion from $1.6 billion in 2022. Adjusted earnings declined 33.5% year over year to $9.64 per share.
The Zacks Rank #5 (Strongly Sell) company’s shares have lost 34% in the past three months against the industry’s 4.6% growth.
Some Better-Ranked Staple Bets
Here, we have highlighted three better-ranked stocks, namely Lamb Weston Holdings, Inc. (LW - Free Report) , Vital Farms Inc. (VITL - Free Report) and Inter Parfums, Inc. (IPAR - Free Report) .
Lamb Weston is a leading global manufacturer, marketer and distributor of value-added frozen potato products. It currently has a Zacks Rank #2 (Buy). LW has a trailing four-quarter earnings surprise of 28.8% on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests growth of 28.3% and 26.9%, respectively, from the fiscal 2023 reported figures.
Vital Farms offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales suggests growth of 29% from the 2022 reported figure.
Inter Parfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. The company currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year earnings and sales indicates growth of 20.4% and 21.6%, respectively, from the 2022 reported figures. IPAR has a trailing four-quarter average earnings surprise of 45.7%.