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Weight Watchers (WTW) to Post Q4 Earnings: What's in Store?

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Weight Watchers International, Inc.’s (WTW - Free Report) , also known as WW, is scheduled to release fourth-quarter 2018 earnings on Feb 26, after the market closes.

The company’s core Services and Product Sales’ revenues are expected to decline in the fourth quarter.

Q3 Results at a Glance

In the last reported quarter, WW posted adjusted earnings per share (EPS) of $1, which outshined the Zacks Consensus Estimate of 99 cents. The metric also rose 53.8% on a year-over-year basis.

Revenues totaled $365.8 million, which fell short of the Zacks Consensus Estimate by 3.7%. However, the top line improved 13% from the year-ago quarter.

Furthermore, the company delivered average four-quarter positive earnings surprise of 112.3%.

Which Way Are Q4 Estimates Trending?

The Zacks Consensus Estimate for fourth-quarter EPS is pegged at 60 cents, mirroring a 62.2% increase year over year. The same for revenues stands at $347.2 million, reflecting an increase of 11.1% year over year.

Let’s delve deeper.

Service Revenues Likely to be Soft in Q4

WW is likely to gain from its wide range of nutritional, activity, behavioral and lifestyle tools and approaches in the fourth quarter. Platforms like SmartPoints, Freestyle and WW Good are expected to be the major drivers of the company’s top line in the segment.
In the last reported quarter, the segment contributed 85.3% to WW’s net revenues. Revenues at the segment grossed $312 million, which increased 14.2% on a year-over-year basis.

However, for the quarter to be reported, the Zacks Consensus Estimate for the segment’s revenues is pinned at $296 million, showing a sequential decline.

In North America and the United Kingdom, the company expects to face stiff competition and challenges, which might prove detrimental to the segment.

Other Factors at Play

Product Sales

WW is likely to rake in huge profits from products like bars, snacks, cookbooks, food and restaurant guides with SmartPoints values and Weight Watchers magazines among others. In the third quarter, the segment contributed 14.7% to WW’s net revenues. Revenues at the segment totaled $53.8 million, up 6.5% year over year.

However, this segment is also likely to face headwinds in geographies like North America and United Kingdom. For the fourth quarter, the Zacks Consensus Estimate for the segment’s revenues stands at $53 million, reflecting a sequential decline.

These apart, WW raised its EPS guidance for 2018. Currently, EPS is projected between $3.15 and $3.25 compared with $3.10 and $3.25, projected earlier. Notably, the mid-point of the guided range, $3.20, is higher than that of the previously-issued range.

What Does Our Model Say?

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP.

Earnings ESP: WW has an Earnings ESP of -2.58%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: WW carries a Zacks Rank #4.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

AMC Entertainment Holdings, Inc. (AMC - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank #3.

The Home Depot, Inc. (HD - Free Report) has an Earnings ESP of +1.22% and a Zacks Rank #3.

The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +0.76% and a Zacks Rank #3.

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