Weight Watchers (WTW) Set for Return to Growth, Says Sidoti; Analyst Initiates Coverage at 'Buy'

(Updated - May 24, 2016 10:40 AM EDT)

Sidoti initiated coverage on Weight Watchers (NYSE: WTW) with a Buy rating and a price target of $25. Analyst Frank Camma thinks initiatives at Weight Watchers will return the company to more profitable revenue and earnings growth. Camma also noted that Weight Watchers is‰ the best-known global consumer weight management brand name.

"As of year-end 2015, management identified and eliminated $250 million of annual costs, compared to 2012. More important, however, is the latest program refinement, “Beyond the Scale,” a more holistic approach to weight loss that incorporates fitness activities and, in our view, is more on trend with how consumers view healthy living that will inure them to the long-term benefits of the brand. The goal is to secure more customers on a subscription basis and, so far, results look good," said Camma.

The analyst continued, "The company is gaining traction in winning over customers, as total paid weeks in 1Q:16 increased 6% in North America. Although total revenue for 1Q:16 was down modestly, sales in North America, Weight Watchers most important market at 65% of revenue, increased slightly. With the important diet season completed, the company signaled confidence by raising 2016 EPS guidance to $0.80-$1.05 (from $0.70 $1.00)."

"Considering the trend in healthcare costs and rising health insurance premiums, proven weight-management programs such as Weight Watchers are likely to remain in favor with employers, insurers and end-users for years to come," added Camma.

For an analyst ratings summary and ratings history on Weight Watchers click here. For more ratings news on Weight Watchers click here.

Shares of Weight Watchers closed at $13.49 yesterday.

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