Medifast Earnings: Increasing Costs Tighten Margins as Net Income Falls

Rising costs hurt Medifast Inc. (NYSE:MED) in the second quarter as profit dropped from a year earlier. Medifast is engaged in the production, distribution, and sale of weight management and disease management products and other consumable health and diet products.

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Medifast Inc. Earnings Cheat Sheet

Results: Net income for Medifast Inc. fell to $2.8 million (20 cents per share) vs. $5.9 million (41 cents per share) a year earlier. This is a decline of 52.7% from the year-earlier quarter.

Revenue: Rose 19.6% to $93.6 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Medifast Inc. reported adjusted net income of 47 cents per share. By that measure, the company beat the mean estimate of 37 cents per share. It beat the average revenue estimate of $90.3 million.

Quoting Management: “We are very pleased with our sales and earnings results in the second quarter as we continued to execute our strategy to reduce costs and drive operational efficiencies throughout Take Shape for Life, Medifast Direct, and the Medifast Weight Control Center and Wholesale Physicians sales channels,” commented Michael C. MacDonald, Medifast’s Executive Chairman and Chief Executive Officer. “These efforts enabled us to generate a profit in the Medifast Weight Control Center and Wholesale Physicians segment. Going forward, we plan to focus our weight control center growth through new and existing franchisees to reduce our corporate capital investment and create higher returns as we continue to increase profitability across each of our sales channels and maximize shareholder value long-term.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 16%, with the biggest boost coming in the first quarter when revenue rose 19.7% from the year earlier quarter.

The company has now seen net income fall for four straight quarters. In the first quarter, net income fell 37.2% while the figure fell 65.8% in the fourth quarter of the last fiscal year and 11.9% in the third quarter of the last fiscal year.

The company trumped estimates last quarter after falling shy in the two quarters prior. In the first quarter, it missed the mark by 5 cents, and in the fourth quarter of the last fiscal year, it came in under estimates by 13 cents.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the third quarter is 36 cents per share, down from 40 cents ninety days ago. At $1.23 per share, the average estimate for the fiscal year has fallen from $1.39 ninety days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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