Monday, December 7, 2009

NutriSystem up 8% on yet another big retail distribution deal. (NTRI, WMT,WAG)

Weight-loss firm NutriSystem (NTRI) announced big retail distribution deals in time for the holiday season, as well as the all-important "2010 New Year’s resolution season."

"Walgreens will be the exclusive retailer selling the 28-day Nutrisystem D weight loss program for people with Type 2 diabetes who want to lose weight. In addition, they will offer the 14-day Silver Starter Program for mature dieters, and the 14-day Ready-To-Go Starter Program. Cards for all of these programs will be sold nationwide in nearly 7,000 stores and on"

The alliance with Walgreens adds to the previously announced retail distribution of Nutrisystem at Costco, Sam’s Club and Walmart and gives Nutrisystem presence in four of the nation’s leading retailers with a total of approximately 10,000 retail locations.

These deals have all been announced in just the past few months, yet Wall Street's earnings estimates for the company have hardly budged....

2009 earnings are expected to come in at $1.00 per share, unchanged from 90 days ago. 2010 EPS estimates have crept up from 1.06 to 1.20, but these estimates will like prove VERY conservative. That's why the stock's current expensive Price-to-Earnings ratio is misleading, as estimates need to be adjusted upwards. The shares could be cheap if the company ends up making $2 per share in the 2010-11 timeframe, but I'm not enamored with the current implied Free Cash Flow Yield.

Below is an interview with NutriSystems' CEO. Kudlow is uncharacteristically idiotic, but there are a couple of decent questions relating to the potential "one-time" nature of the company's sales.

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