Medifast Earnings: An Early Look

Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Medifast (NYSE: MED  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

With increased attention to obesity and weight control among the health-care industry, Medifast is trying to capitalize with its combination of weight-loss centers and custom-made nutritional products. But will a controversial competitor hurt Medifast's results? Let's take an early look at what's been happening with Medifast over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Medifast

Analyst EPS Estimate	$0.25
Change From Year-Ago EPS	178%
Revenue Estimate	$82.9 million
Change From Year-Ago Revenue	19%
Earnings Beats in Past 4 Quarters	2

Source: Yahoo! Finance.

Will Medifast give investors what they want this quarter?
Analysts have generally been comfortable with their calls for Medifast's earnings over the past few months, keeping their estimates stable for the just-ended quarter. Yet although they've boosted full-year 2013 projections by $0.02 per share, the stock has plunged, falling 23% just since early December.

Medifast has taken collateral damage in the fight over Herbalife (NYSE: HLF  ) , which sells dietary and nutritional supplements along the same lines as some of Medifast's products. With investors Bill Ackman and Carl Icahn having vocally taken opposing sides about whether Herbalife is a pyramid scheme, the legitimacy of the entire multilevel marketing concept has taken a hit, and that helped send Medifast shares lower in sympathy.

But Medifast has also been dealing with a lot of turnover at its top levels. After dealing with a CEO change last year, the company's acting CFO resigned in late December after having served just a single month, raising questions about whether the move was prompted by anything troubling at Medifast.

Despite all these troubles, Medifast has been able to grow its earnings, in stark contrast to NutriSystem and its breakeven results. Yet margins on its products and services are much lower than competitor Weight Watchers International (NYSE: WTW  ) , perhaps because Weight Watchers has done a better job of penetrating large distribution channels through grocery stores.

In its quarterly report, watch for Medifast to talk about how it intends to respond to the Herbalife situation, as well as any plans to boost margins. If Medifast can get its margins closer to Weight Watchers, then it stands to give investors good returns as long as it can keep growing its revenue.

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