WTW 040412
Weight Watchers International Inc. (NYSE: WTW)
We live in a modern social society where physical attributes are scrutinized more than ever. Maybe it’s the 800 million people posting pictures of themselves and others on Facebook, or perhaps the fact that just about every American between the age of 12 and 60 has a Smartphone with a camera. This trend is echoed in modern societies around the world.
It could also be due to the health revolution that is sweeping across the nation. Social media and the internet has made us more aware of our diets, including the ones that work and other that may not be so healthy. Diets of all kinds have long been a part of global culture. In America specifically, weight loss diets have come and gone over the decades; especially the fads from Atkins to Grapefruit, the South beach diet and many more.
For the past 40 years, Weight Watchers has been steady force in dieting. The longevity of WTW could be that they offer psychological and behavioral training along with exercise and of course meal planning and most importantly, communal support.
WeightWatchers.com is now a virtual meeting place for Weight Watchers users to keep on track and support themselves and others. It may also be one of WTW’s keys to growth in our online world and their next leg up for the stock.
Company Description & Developments
Weight Watchers got their start in Queens NY at the home of their founder Jean Nidetch. Today the company has operations in over 30 countries around the world with nearly 30,000 employees.
Over the years, the company has had some high profile spokespeople helping add credibility to their brand and methods (which obviously work). Jennifer Hudson, Charles Barclay and even Dr. Oz are currently on board.
Their stock has also gained a bit of popularity because of a recent unusual move. In March, WTW completed a Self-Tender Offer, where they spent about $720 million to buy back roughly 12% (9,038,999 shares) of their shares from the marketplace at a price of $82. The shares were retired, which increases equity for remaining shareholders. This move is no doubt bullish on the company’s part and perhaps a free look into trends they are seeing in the space.
U.S. News & World Report recently published its first-ever ‘Best Diets’ rankings and Weight Watchers was ranked #1 among 20 different diet programs.
Financial Profile
WTW is a mid-cap (5.79 billion) company that is trading at about 24.13 times forward (expectations for next quarter) earnings. WTW recently became a Zacks Rank 1 strong buy on April 4th.
Total 2011 sales increased 12.50% compared to full year 2010; earnings increased from $2.56 in FY2010 to $4.11 FY2011 and they are expected to earn $4.97 for the full year (FY2012) according to the Zacks Consensus Estimate.
Earnings Estimates
Of the 7 analysts who cover Weight Watchers, the consensus is for the company to grow earnings by 21% in the current year (FY2012) and roughly 18% in FY2013. WTW missed expectations marginally last quarter, but has surprised analysts to the upside 3 quarters prior; their average surprise was a positive 7.68% over the last 4 reports.
In terms of the magnitude of analyst estimate trends, we are seeing consensus estimates higher than they were 30 days ago for the next quarter as well as FY2012 and FY2013. Current quarter estimates have come down about a penny over the past month. WTW is expected to earn 77 cents when they report on Mat 11th.
Market Performance & Technicals
Weight Watchers stock price came into 2012 with a bang; shares leapt from $53 to $70 in the blink of an eye. Momentum has slowed a bit, but the pullback to these levels around $75 may provide a more advantageous entry for the long term investor.
Support comes around the $70 level as well as the 200 day moving average, which currently stands at $68.50.
WTW has just about matched the S&P 500’s performance over the past year. It outpaced it by almost 3.3% in the past 3 months, but trailed in the last month by the same amount. All in all, WTW’s performance has been strong, but doesn’t seem overbought relative to the broad market.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
