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Why Shares of NutriSystem Inc. Plunged 16% Today

By Travis Hoium – Jul 27, 2017 at 5:34PM

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Even a big earnings beat wasn't enough to satisfy investors today.

What happened 

Shares of weight-loss company NutriSystem Inc. (NTRI) fell as much as 15.6% in trading Thursday after reporting second-quarter earnings. At 3:55 p.m. EDT, shares were still down 12.2% for the day. 

So what

Strangely enough, NutriSystem said revenue jumped 30%, to $194.9 million, and net income was up 52%, to $24.4 million, or $0.80 per share. Results easily topped the $180.9 million in revenue and $0.61 per share in earnings that analysts expected.

Person checking their waistline.

Image source: Getty Images.

Management also said they expected third-quarter revenue of $153 million to $158 million with earnings of $0.42 to $0.47 per share, and full-year revenue of $684 million to $694 million and earnings of $1.65 to $1.75 per share. These projections imply slowing growth in the back half of the year, which is really the only flaw I can spot in earnings. And even that may not end up being a problem if management is setting a bar they know they can beat. 

Now what

It's surprising the stock is trading lower today, given the strong results, but sometimes, the market looks further into the future than we initially think to see where a company is headed. If growth is decelerating, it could be a bad sign for a stock trading at 32 times the high end of 2017 estimates. I wouldn't get too worried about the plunging stock today because NutriSystem is still performing well. It just wasn't a favorite of traders this quarter.

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.

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