NutriSystem (NTRI, Financial) saw an 11.6% jump in its stock to $19.35 in after-hours trading following the company’s upbeat fourth quarter results for FY2014. The company reported a 13% growth in revenue to $79.2 million in Q4 2014, compared to $69.9 million in the year-ago quarter. The figure, however, fell shy of the consensus estimate figure of $80.4 million. NutriSystem also reported growth in earnings from 4 cents a share in the fourth quarter of fiscal 2013 to 18 cents a share in the last quarter.
New Products, Strategies Boost Sales
NutriSystem, a leader in the weight-loss industry, reported its sixth consecutive quarter of year-over-year growth in revenue due to higher sales during Q4 2014, with the company witnessing a 380 basis points growth to 51.5% in its gross profit margin. While NutriSystem logged a gross profit of $40.8 million in the last quarter, up 22% versus the prior-year quarter, the company’s adjusted EBITDA grew 152% to $11.6 million compared to the year-ago figure of $4.6 million.
For the full-year 2014, NutriSystem saw a 13% jump in revenues to $403.1 million, compared to the previous fiscal’s figure of $358.1 million. While adjusted net income grew 66% from $11.6 million in 2013 to $19.3 million, adjusted EBITDA grew 35% from $31.6 million in the previous fiscal to $42.7 million. The company’s GAAP diluted EPS stood at 66 cents a share, up 65% from the previous fiscal’s 40 cents a share. NutriSystem, which rewarded investors with net dividends worth $20.4 million in cash during 2014, also announced a quarterly dividend of $0.175 a share payable to stockholders during March 2015.
The company attributed its upbeat results to the successful execution of its turnaround plan its ability to proactively address evolving customer needs. NutriSystem also successfully launched new products and implemented new pricing strategies during the fiscal, which drove growth to the company’s top and bottom lines. Among the company’s launches were the Nutrisystem My Way with Fast 5, which helped attract new customers to the brand, and NuMi, a state-of-the-art digital weight loss app that positioned NutriSystem as the first in its market space to integrate with a wide array of wearable fitness devices such as Jawbone, Apple Motion and FitBit.
The company, which competes with Weight Watchers International (WTW, Financial) and MediFast Inc. (MED, Financial) in the weight management products and solutions market, has posted better growth in the last fiscal compared to its competitors.
The Year Ahead
NutriSystem projected revenues of around $425-$445 million for fiscal 2015, with an adjusted EBITDA of $47.8-$52.5 million. While experts project earnings of 80 cents a share for NutriSystem in 2015, the company pegged its GAAP earnings in the 73-83 cents a share range. The company also revealed its guidance for Q1 2015 wherein it expects revenues in the range of $129-$134 million during the quarter.
While the company’s adjusted EBITDA is expected to clock around $4.5-$6.7 million during the first quarter, GAAP earnings are expected to lie in the $0.02-$0.07 a share range. The company, which saw growth in new customer revenues by 20% year-over-year in fiscal 2014, expects the trend to continue through FY2015.
Final Thoughts
NutriSystem’s strong Q4 result sets it ahead of its market rivals that are struggling to cope with changing customer aspirations. The company, which introduced a number of new offerings in 2014, plans to continue adapting and innovating in order to retain existing customers as well as attract new subscriptions. However, the current high dividend payout ratio of 135.87% indicates that the company will not be able to sustain its dividend growth in the upcoming years, which could be a concern to investors. Experts foresee an average annual earnings growth rate of 11.5% for NutriSystem over the next 5 years, with a 22.73% growth in earnings in fiscal 2015 compared to the previous year. Consequently, the NutriSystem stock currently carries ‘buy’ guidance for the short to mid-term.
