Weight Watchers Is Still a Sell

Weight Watchers International (WTW) just reported Q3 earnings of 68 cents a share which was four cents higher than Wall Street’s consensus.

This was a tough quarter for the company–sales dropped 8% to $324.5 million. Still, I’m impressed by the way they kept costs under control. They cut SGA (selling, general and admin) by 12%. This is a very good example of what we saw in last week’s productivity report. Companies are learning to do more with less.

Weight Watchers gave fourth-quarter guidance that was below where the Street was. The company said the lower guidance is due to their “buy-one-get-one-free” promotion. I still have Weight Watchers rated Sell and I want to see more evidence of top-line growth before I upgrade the shares.

My top diet stock continues to be Medifast (MED). On October 29, Medifast reported earnings of 23 cents which was more than double what they earned a year ago. Sales were up 65%. In just four months since I added the stock to the Emerging Growth Buy List, we’re up over 150%. Medifast continues to be a very strong buy.

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