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The Skinny On A Top Stock: Nutrisystem Looks Ripped This Diet Season

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Bikini-bod season is nigh upon us.

It's a good thing for Nutrisystem ( NTRI ) that the weight-loss plan provider is expected to report a pretty killer "diet season."

When the company reports first-quarter results Wednesday after the close, analysts are expecting profit to almost double, with revenue jumping 25%.

Craig-Hallum analyst Alex Fuhrman said in a note to clients last week that "all signs point to another beat and raise" for Nutrisystem, citing "strong" Google searches, ramped-up advertising and developments with the South Beach Diet brand.

"We believe the core Nutrisystem brand has resonated well with consumers in 2017, and a focus on men (is) likely yielding stronger performance than other diet space peers," he wrote in his Thursday report. "Combined with the continued advertising of the South Beach Diet brand, which is indicative of strong consumer interest, we believe Nutrisystem will continue to gain market share in 2017."

Tsunami Of Options

When it comes to losing weight, the tsunami of options can be overwhelming. Googling "diet plan" yields 33 million search hits. Searching for "best way to lose weight" brings up more than twice as many results.

Diet delivery plans now also contend, to a degree, with home-delivery meal-kit options like Blue Apron, Hello Fresh and others - though many of those cater to amateur gourmands, not necessarily health-conscious diners. Some, like Pete's Paleo, Sakara and Purple Carrot, appear to cater to both.

[ibdchart symbol="NTRI" type="weekly" size="threequarter" position="leftchart" ]For its part, Nutrisystem is one of the heavyweights, no pun intended, offering meal programs that involve no calorie-plans or point-counting and a lot of Nutrisystem-branded food, including pancakes, hamburgers and whoopie pie desserts.

The company's five-day weight-loss kits and packaged products - such as its NutriCrush bars and shakes and Thick Crust Pizza - are available at Wal-Mart ( WMT ).

Now it has another well-known brand in its portfolio. After acquiring the South Beach Diet brand in December 2015, Nutrisystem reintroduced it at the start of this year as a diet-plan system that includes meal deliveries. The company expects South Beach to add $20 million to $25 million to revenue in fiscal 2017, with "meaningful growth" expected the following year.

Shares Soar

Investors felt good about the last batch of earnings and sales figures in February. Shares of Nutrisystem took off like a rocket after handily beating the Street's fourth-quarter forecasts. Breaking clear of a period of consolidation in heavy volume, the stock popped 18.6% to 46.50 on Feb. 28 and hasn't looked back.

That action led analyst Matthew Gall of Barrington Research to downgrade the stock to market perform from outperform "solely based on valuation."

"Guidance for the Q1 diet season and (fiscal 2017) was particularly strong and ahead of consensus expectations, which we believe is now reflected in NTRI's current share price," he wrote on March 24, adding that trading at a premium to its diet peers "reflects consistently strong execution by management and higher growth rates."

IBD'S TAKE:Nutrisystem's jump after its last earnings report sent shares soaring, but also extended the stock. Still, shares keep climbing and are up nearly 20% from the Feb. 28 rally. The stock is ranked No. 1 in IBD's Cosmetics and Personal Care Group.

Shares now are in the mid-50s, finishing Monday's session down 0.8% to 55.05.

For the first quarter, Nutrisystem is expected to post revenue of $202.9 million for the quarter that includes the key January-February "diet season" months that come courtesy of New Year's resolutions and follow the winter holidays. Earnings are seen catapulting 89% to 17 cents a share from 9 cents in the prior-year period.

More Focus On Men

Unlike, say, Oprah Winfrey-endorsed Weight Watchers International ( WTW ), Nutrisystem has a greater focus on building its men's business, with commercials targeted specifically to that demographic. That is seen as helping the company get a greater slice of the - presumably low-calorie - diet-plan pie.

And compared with peers such as Hydroxycut, Jenny Craig, Medifast and Weight Watchers, which have toned down their ad spending in April from the prior year, Nutrisystem has accelerated its spending on national TV commercials, which Craig-Hallum's Fuhrman sees as an indicator that the spring ads are performing well with customers.

Fuhrman told Investor's Business Daily that men account for 25%-30% of Nutrisystem's customer base, about double that of Weight Watchers' clientele.

Diets are tricky things, though. A 2015 John Hopkins analysis of 32 commercial weight-loss programs found that "few" are backed by rigorous scientific data; it found that only Weight Watchers and Jenny Craig were backed by clinical trials of a year or longer.

Nutrisystem offered "promising weight-loss results," said researchers, but more data were needed to evaluate long-term effectiveness of the plan.

It fared well enough with health experts at U.S. News & World Report. The publication ranks Nutrisystem in fifth place in its Best Commercial Diet Plans category and No. 16 in Best Diets Overall.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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