What happened 

Shares of fitness equipment maker Nautilus, Inc. (NYSE:NLS) fell as much as 17.3% on Wednesday after reporting fourth-quarter earnings. At 3:25 p.m. EST, shares were still down 14.9% on the day. 

So what

Revenue jumped 15.2% from a year ago, to $125.8 million, driven by a 43.6% increase in retail sales, to $60.0 million. But direct sales fell 2.7%, to $65.2 million, and overall results fell well below the $132.7 million in revenue that Wall Street analysts expected.

Two people working out on treadmills at home.

Image source: Getty Images.

Income from continuing operations improved from $9.9 million a year ago to $12.0 million, or $0.38 per share, but analysts were looking for $0.41 per share in earnings, so this was a disappointment, as well. Expectations for future earnings is often what drives stock prices, so when a company falls short of the bar analysts set, it can mean a quick fall for shares -- which is what we're seeing today. 

Now what

Sometimes, improving results aren't enough for investors, and that's what happened to Nautilus today. Revenue and earnings were both up, helped by improving margins, but investors were expecting a lot more growth. 

It also has to be a bit concerning that the direct segment is in decline given the higher gross margin in the segment and the leverage it has marketing. Until we see sales turn around in the direct market, it may be a long recovery for Nautilus' shares. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.