NutriSystem's Strong Top Line Growth To Continue

Small Cap and Mid Cap Watch List member NutriSystem (NTRI) reported earnings:

NutriSystem, Inc. (NASDAQ:NTRI), a leading provider of weight management and fitness products and services, announced results for the first quarter ended March 31, 2007, including:

– An increase in revenues of 62% to $238,360,000 in the first quarter of 2007 compared to $146,751,000 in revenues in the first quarter of 2006;

– Growth in operating income to $59,610,000 (25.0% of revenues) in the first quarter of 2007 compared to $35,179,000 (24.0% of revenues) in the first quarter of 2006; and

– An increase in net income of 70% to $37,867,000 or $1.04 per diluted share in the first quarter of 2007 compared to net income of $22,335,000 or $0.60 per diluted share in the first quarter of 2006.

Pretty impressive. The consensus was estimating NutriSystem would earn $0.91 on $213 million in revenues. Apparently all those ads we’ve been seeing on CNBC are having the desired effect. And while most people complain about yo-yo dieting, regained weight is contributing to sales as well:

“The solid growth of our core women’s market and continued strength of the men’s market allowed us to achieve record earnings,” said Michael J. Hagan, Chairman, President and Chief Executive Officer. “In addition, an integral part of our first quarter has been the ongoing expansion of our pool of ex-customers and their desire to return to NutriSystem for weight management services.”

As unfortunate a choice of words as “expansion” may be in this case, investors were pleased by the ballooning growth of Nutrisystem’s customers top line. Particularly since the company indicated it will continue:

For the second quarter of 2007, the Company estimates that revenues will be between $190 and $200 million, an increase of at least 43% year over year. Diluted earnings per share are expected to be between $0.82 and $0.86, an increase of at least 55%. Further, the Company expects to add at least 210,000 new Direct channel customers in the second quarter of 2007. The Company now expects full year 2007 revenues will be between $790 million and $805 million. 2007 diluted earnings per share are expected to be between $3.34 and $3.46 per share. This guidance does not reflect the effect of any potential future stock repurchases.

Analysts were expecting $0.70 on $171 million in revenue for the coming quarter and $3.05 on $735 million for the year.