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Here's Why Shares of Nutrisystem Are Down 22% Tuesday

By Daniel Miller - Feb 27, 2018 at 1:01PM

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Despite growing its top and bottom lines, advertising campaign woes and weak guidance have investors concerned.

What happened

Shares of Nutrisystem Inc. (NTRI), a leader in the weight-loss industry with weight-loss supplements and structured food delivery programs, are plunging 22% as of 12:25 p.m. EST Tuesday after reporting fourth-quarter results and disappointing guidance.

So what

Revenue for the fourth quarter checked in at $131.2 million, a 20% year-over-year improvement and ahead of analysts' estimates calling for $129 million. Nutrisystem's net income checked in at $10.9 million, or $0.36 per share, which was ahead of last year's $0.29 per share result and ahead of analysts' estimates calling for $0.30 per share.

A spread of healthy foods including salmon, avacado, blueberries.

Image source: Getty Images.

Dawn Zier, president and CEO of Nutrisystem, said in a press release:

"In 2017, we achieved accelerated growth for both revenue and earnings. Double-digit revenue growth from both new and reactivation customers was driven by a highly effective advertising campaign, media expansion, and increased engagement throughout the customer journey. We also proved out our multi-brand strategy, demonstrating that we have a scalable platform to which we can continue to add brands as the right opportunities present themselves."

Now what

The stock is trading 20% lower on Tuesday in part because of disappointing guidance. Nutrisystem expects its first-quarter 2018 earnings to check in between $0.03 and $0.08 per share, well below analysts' estimates of $0.28 per share. Management attributes the weak forecast to the company's struggling efforts to attract customers during the diet season with ratings declines at major cable networks including Fox News and CNN. While the first quarter will be weak, it's not all doom and gloom for the weight-loss company. Management will have to freshen up its advertising campaigns and zero in on its demographic on cable networks -- but those are issues that can be solved in time and these types of movements aren't unusual for nutrisystem.

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