Stock Story -
Wellness company Medifast (NYSE:MED) fell short of analysts' expectations in Q2 CY2024, with revenue down 43.1% year on year to $168.6 million. Next quarter's revenue guidance of $135 million also underwhelmed, coming in 16.6% below analysts' estimates. It made a GAAP loss of $0.75 per share, down from its profit of $2.77 per share in the same quarter last year.
Is now the time to buy Medifast? Find out by reading the original article on StockStory, it's free.
Medifast (MED) Q2 CY2024 Highlights:
- Revenue: $168.6 million vs analyst estimates of $174.1 million (3.2% miss)
- Operating income: ($7.9) million vs analyst estimates of $4.4 million (large miss)
- Revenue Guidance for Q3 CY2024 is $135 million at the midpoint, below analyst estimates of $161.8 million
- EPS (GAAP) guidance for Q3 CY2024 is $0.38 at the midpoint, beating analysts' estimates by 171%
- Gross Margin (GAAP): 73.2%, up from 71.1% in the same quarter last year
- Market Capitalization: $229.6 million
Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE:MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.
Personal CareWhile personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering.
Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales GrowthMedifast is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's revenue has declined over the last three years, dropping 15.4% annually. This is among the worst in the consumer staples industry, where demand is typically stable.
This quarter, Medifast missed Wall Street's estimates and reported a rather uninspiring 43.1% year-on-year revenue decline, generating $168.6 million in revenue. The company is guiding for a 42.8% year-on-year revenue decline next quarter to $135 million, a further deceleration from the 39.6% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 15.6% over the next 12 months.
Operating Margin Medifast has done a decent job managing its expenses over the last two years. The company has produced an average operating margin of 10.3%, higher than the broader consumer staples sector.
Analyzing the trend in its profitability, Medifast's annual operating margin decreased by 8.9 percentage points over the last two years. Even though its margin is still high, shareholders will want to see Medifast become more profitable in the future.
In Q2, Medifast generated an operating profit margin of negative 4.7%, down 17.7 percentage points year on year. Conversely, the company's gross margin actually rose, so we can assume its recent inefficiencies were driven by increased operating expenses like sales, marketing, and administrative overhead.
Key Takeaways from Medifast's Q2 Results Medifast's revenue forecast for next quarter was below. Also, its operating profit missed Wall Street's estimates. Overall, this was a bad quarter for Medifast. The stock traded down 9.3% to $19 immediately after reporting.
