Why Medifast Shares Dropped
Mar 8th 2013 2:48PM
Updated Mar 8th 2013 4:05PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of weight-loss specialist Medifast were slimming down today, falling as much as 11% after the company provided weak guidance in its quarterly earnings report.
So what: The health-supplement maker actually beat earnings estimates in the quarter by $0.03 with a profit of $0.28 per share, and it delivered sales in line with estimates at $83.2 million, or a 20% increase from the year before. However, first-quarter guidance was significantly below expectations, as Medifast sees a per-share profit of just $0.32-$0.35 against estimates of $0.45. Part of the reason for the lower guidance was the shift in the Easter holiday, meaning the quarter will end two days earlier than last year. Full-year EPS guidance of $1.70 to $1.80 was in line with analysts' forecasts.
Now what: Considering that Medifast's 2013 guidance still matches analysts' estimates, today's drop seems unreasonable. Medifast is still growing at a steady pace, and shares look very affordable after today's drop. The stock recovered slightly, but was still down 7.3% by midday. The health-supplement sector has been under increased scrutiny lately after hedge fund manager Bill Ackman attacked Medifast rival Herbalife, calling it a pyramid scheme.
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The article Why Medifast Shares Dropped originally appeared on Fool.com.Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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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