Shares of workout company Nautilus Inc. (NLS -7.29%) jumped as much as 13.1% in trading Tuesday after the company reported first-quarter earnings. Shares ended 11% higher on the day.
Revenue for the first quarter fell 6.3% to $113.3 million, and net income dropped 38% to $7.1 million, or $0.23 per share. But revenue was above the guidance range of $110 million to $112 million, and adjusted earnings of $0.26 per share hit Wall Street's expectations.
Management was encouraged by the results, and asserted that new products like its Bowflex Cardio Performance series will help drive customer engagement both in-store and in the direct channel.
This is really a case of low expectations helping a stock after earnings. What investors should be looking at is that revenue is on the decline and shares are still trading at 18 times trailing earnings. Until we see that new products are actually getting traction with customers, and signs that the bottom line is going to improve, I'll be skeptical of Nautilus' stock. There's just too much competition in the home fitness space to think this is going to be a high-growth company long term.