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NutriSystem Fattens Up Q1 Outlook

Posted: Apr 10, 2008 10:47 AM by Glenn Curtis

Tickers in this Article: UPS, WM, AMD, TWX, NTRI

We've been bombarded in recent weeks by a number of high profile companies that lowered the bar for Q1 or the full year 2008 including AMD (NYSE:AMD), Washington Mutual (NYSE:WM) and UPS (NYSE:UPS); luckily, there is at least one company that's raising expectations. Diet company NutriSystem (Nasdaq:NTRI) bucked the trend and increased its Q1 revenue estimate Tuesday.

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What The Earnings Bump Means To Shareholders
Less than two months ago, management at NutriSystem called for revenue of $200-210 million and $18-22 million in adjusted EBITDA for the first quarter ended March. But management is now calling for revenue of $216 million and adjusted EBITDA of $24-27 million. (To learn more about this valuable ratio, check out A Clear Look At EBITDA and EBITDA: Challenging The Calculation.)

The increase is not earth shattering by itself, and is still shy of the $238 million the company generated in the first quarter of last year, but it is a pleasant surprise nonetheless. Also, the bump EBITDA should give the bottom line a decent boost. Note that a full first-quarter earnings report is due out on April 23.

It's important to read into what management's updated guidance means. The first to note is that the updated guidance came close on the heels of the original estimate. Business must have taken a pretty big shift for the better in a short period of time. (For related reading, see Can Earnings Guidance Accurately Predict The Future?)

This could be a big lure for retail investors and the stock could get a boost as a result. Folks, if I were considering investing in NutriSystem, I would want to take advantage of such momentum. If this momentum were to continue, a full-year guidance bump up could potentially be just around the corner. This would certainly draw analyst attention. Any positive research reports could cause the stock to pop.

New Skipper
In conjunction with the first quarter guidance NutriSystem also announced that CEO Michael Hagan, and Joseph Redling, NutriSystem's current president and chief operating officer, will be assuming the role as of May 1.

This is good news for the stock, too. Redling is an operations guy who has lots of experience with marketing, previously he was a Chief Marketing Officer at Time Warner's (NYSE:TWX) AOL division. He has the potential to kick earnings into high gear and to boost morale. The move will also be seen as a positive by the analyst community, and that I suspect could have a positive effect on the stock price. (To lean more about CEOs, COOs, and CMOs, read out article The Basics Of Corporate Structure.)

Bottom Line
NutriSystem's updated guidance new CEO could have a very tangible impact on the stock price in the days and weeks ahead. It's nice to see that there are a few bright stories amongst the doom and gloom.

By Glenn Curtis

Glenn Curtis started his career in the 1990s as an equity analyst for a regional firm in New Jersey. There, he covered companies in the technology, entertainment, and gaming industries. Curtis has since worked as a financial writer at a series of both web and print publications, including TheStreet.com and Registered Rep Magazine. He has held his series 6,7,24, and 63 securities licenses.

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