NutriSystem Earnings Preview

After beating estimates last quarter by 18 cents, NutriSystem (Nasdaq: NTRI  ) has set the standard for itself. The company will unveil its latest earnings on Thursday, July 28. NutriSystem is a provider of a weight management system based on a portion-controlled, prepared meal program.

What analysts say:

• Buy, sell, or hold?: Analysts generally think investors should hang on to NutriSystem, with half rating the stock a hold. Analysts don't like NutriSystem as much as competitor Medifast overall. Five out of five analysts rate Medifast a buy compared to two of four for NutriSystem. Wall Street has warmed to the stock over the past three months, with analysts increasing their endorsement from Hold to Moderate buy.
• Revenue Forecasts: On average, analysts predict $118.3 million in revenue this quarter. That would represent a decline of 16.5% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.29 per share. Estimates range from $0.28 to $0.30.

What our community says:
CAPS All-Stars are solidly behind the stock with 92.7% awarding it an "outperform" rating. The community at large backs the All-Stars with 90.1% granting it a rating of "outperform." Fools are gung-ho about NutriSystem and haven't been shy with their opinions lately, logging 495 posts in the past 30 days. Despite the majority sentiment in favor of NutriSystem, the stock has a middling CAPS rating of three out of five stars.

Management:
Revenue has fallen for the past three quarters. The company's gross margin shrank by 2.7 percentage points in the last quarter. Revenue fell 16.5% while cost of sales fell 11.5% to $63.8 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q1	Q4	Q3	Q2
Gross Margin	51.9%	56.5%	56.6%	56.4%
Operating Margin	-3.9%	13%	11.5%	14.1%
Net Margin	-2.6%	8.1%	7.6%	8.9%

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