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Why Weight Watchers Stock Was Soaring 20% Friday Morning

By Daniel Miller – Updated May 3, 2019 at 11:35AM

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Despite declining top- and bottom-line results from the prior year, there are reasons for investors to remain optimistic for 2019.

What happened?

Shares of WW International (WW -1.22%), the global wellness company formerly known as Weight Watchers, soared over 20% higher during early morning trading Friday after a better-than-expected first quarter. But let's put that data into some context.

So what

WW's gains today could be a case of "not great results, but better than expected." The company's first-quarter revenue checked in at $363.2 million, just shy of analysts' estimates calling for $366 million. It also posted a loss of $10.7 million, or $0.16 per share, which was narrower than analysts' expected loss of $0.26 per share during the first quarter. While the company's bottom line was better than expected, both the top and bottom lines were a pullback from the prior year's $0.56 earnings per share on revenue of $408.2 million.

"Trends improved sequentially throughout the quarter, resulting in 4.6 million subscribers at quarter end, up 1% year over year," CEO Mindy Grossman said in a press release. "We are confident that our strategy to focus on providing holistic wellness solutions leveraging our best-in-class weight management program is the right path to support long-term sustainable growth."

A salad and weight loss phone application

Image source: Getty Images.

Now what

The stock has been on a roller coast ride, with shares rocketing over 33% higher in the past seven days. But even with that pop, the stock is still down 67% over the past year.

WW Chart

WW data by YCharts.

While first-quarter revenues declined 11%, or 9% on a constant currency basis, there were a couple of bright spots for investors. Total paid weeks were up 4% during the first quarter versus the prior year, and as the CEO noted, end-of-period subscribers increased 1% to 4.6 million. Lastly, management upped its full-year earnings guidance to the range of $1.35 to $1.55 per share, from prior guidance of $1.25 to $1.50 per share, giving investors more confidence for the remainder of 2019.

Investors might be jumping on board today thinking this is the bottom of WW's near-yearlong slide, especially if management can focus on increasing member recruitment and retention, and improving its costs throughout 2019.

Daniel Miller has no position in any of the 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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