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Why Sunrun, Medifast, and Zumiez Slumped Today

By Dan Caplinger – Mar 11, 2016 at 7:27PM

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Even though the market climbed, these stocks missed out. Find out why.

Image: Sunrun.

Stocks rallied on Friday, finishing a fourth consecutive week of gains as investors bought into the idea that further government stimulus measures from central banks in Europe and elsewhere in the world might be enough to jump-start growth. The Dow and S&P 500 both posted gains of between 1.25% and 1.75%, and some investors believe that even as the bull market enters its eighth year, further broad-based gains could be possible. Nevertheless, some stocks missed out on the rally, and among the worst performers on Friday were Sunrun (RUN -1.17%), Medifast (MED 0.26%), and Zumiez (ZUMZ -2.66%).

Sunrun fell 11% after the residential solar specialist reported its fourth-quarter financial results Thursday night. The company closed the year with an 85% organic increase in booked projects to 274 megawatts and deployment growth of more than 75% to 203 megawatts. Yet the company's future prospects look far less certain, and Sunrun said that it expects deployments of about 285 megawatts in 2016, indicating a slower pace of growth than last year. Many investors had hoped that Sunrun could find a way to maintain more exponential growth rates, and even though the actual raw increase in deployment volume is roughly the same as the increase in 2015, the slowdown in percentage terms was enough to reawaken concerns about the health of the residential solar industry more broadly.

Medifast dropped 6% in the wake of its earnings and revenue miss in its fourth-quarter financial report Thursday afternoon. Income from continuing operations climbed 50% from year-ago levels, but net revenue fell 2%, and the company reported a modest drop in revenue from its franchise weight-control center unit. The big hit came from the Medifast Direct business, where revenue dropped 18% despite a big rise in marketing and advertising expenses. Given the increased competition in the weight loss and weight management business, Medifast will need to work hard to sustain its position in the industry, and CEO Michael MacDonald said that he believes that the company has "a strong foundation for future growth and shareholder value creation." Still, Medifast's lukewarm outlook for 2016 suggests further challenges in generating sales growth and rising earnings at the pace that investors would like to see.

Finally, Zumiez lost 13%. The apparel retailer disappointed investors with its fiscal fourth-quarter results, which featured a 6% decline in overall revenue and comparable store sales that fell 9.5% during the holiday period. CEO Rick Brooks blamed the challenging retail environment for much of its poor performance, but he said that Zumiez would focus on efforts to improve its internal efficiency as well as expanding its business in Europe to take advantage of more favorable conditions in that market. Still, with further decreases in revenue and comps during February and a projected net loss for the full fiscal first quarter, it could take a while for Zumiez's prospects to surf higher.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Zumiez Stock Quote
$23.45 (-2.66%) $0.64
Medifast Stock Quote
$120.48 (0.26%) $0.31
Sunrun Stock Quote
$31.32 (-1.17%) $0.37

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