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Nutrisystem - Earnings Downside Risk To An Earnings Miss On Preliminary Data

|Includes: Nutrisystem Inc (NTRI)

Nutrisystem is scheduled to report earnings on March 5th, Tuesday, after the bell. This is the most critical report of the year for the weight loss company as analysts estimate management to announce Q4 EPS of (0.14) on 63 million while Q1 guidance is expected to be (0.06) on 121.4 million in revenue.

Preliminary channel-checks have been poor as all measurements have been below general analyst sentiment. Our checks reveal that the sector in general is a laggard; underwhelming Q4 results from Weight Watchers confirm our position.

Reasons for the general deceleration in the weight-loss sector (on a company to company basis) are attributed to the saturation of the market from the entry of new players such as "MyFitnessPal", "Lose It!", and "E-diets". Though the sector as a whole may be in good health, the entry of these competitors have resulted in diminished margins, and revenue for companies that have are already reached critical maturation phases such as NutriSystem and Weight Watchers. Many believe these two companies to be at the top of their respective weight-loss "sectors"; diet via monthly food packaging, and points counting.

Nutrisystem shares could sell off or gain at least 5-10% either way depending on which way the die falls. Institutional Insider analysts believe that the risk is weighted more to the downside due to the results of our proprietary channel-checks.

With shares trading currently at ~$8.20 shares will hit $9 or $7 on the day of earnings.