Medifast touts higher-than-expected earnings in Q3

Medifast, the Owings Mills-based company that offers weight-loss plans and its own brand of meals and snacks, reported its third-quarter results Thursday, with earnings of $.45 per diluted share exceeding forecasts.

Income from the company’s continuing operations was $5.4 million, up from $5.3 million, or $.42 per diluted share, in third-quarter 2014.

“Our top line results, solid gross margin expansion and expense leverage enabled us to generate earnings above our guidance for the third quarter,” Michael C. MacDonald, the company’s chairman and CEO, said in a statement. “We are pleased with the sequential improvement in our business and our meaningful progress to advance the growth and simplification of Take Shape For Life. Moving forward, our team remains focused on executing our strategic initiatives as we improve the efficiency across our differentiated sales channels to help drive higher revenues and profitability long-term.”

Third-quarter income was two cents higher than the high-end of the company’s estimates, MacDonald said.

Analysts, including Zack’s Investment Research, projected earnings of $.42 per diluted share.

Net revenues for Medifast‘s continuing operations dropped four percent to $65.9 million, compared to $69 million in the same quarter of 2014.

But revenue for Medifast’s direct sales channel, Take Shape for Life, which accounts for more than 75.7 percent of the company’s revenue for the quarter, was $49.9 million, a figure consistent with third-quarter 2014 results. Those results show the third straight quarter of improvement in the year-over-year revenue trend, according to the company.

Revenues decreased for several other channels, including the Franchise Medifast Weight Control Centers, which saw a 5 percent decrease to $4 million from the same quarter last year.  The company had 62 franchise centers in operation at the end of third-quarter 2015 compared to 69 centers during the same period in 2014.

In the remaining quarter of 2015, Medifast expects net revenue from continuing operations to be between $60.5 million and $63.5 million and earnings per diluted share of between $.31 and $.35, according to the company.

Fiscal 2015 revenue is now projected to be between $272 million to $275 million with earnings per diluted share of between $1.72 to $1.76.

Medifast nominated five new members to its board of directors this year as part of a deal with activist investor Engaged Capital LLC, which owns about 6 percent of the company’s stock.

The company has faced increased competition from new technology that helps people stick to their diets, and profits in 2014 dropped 45 percent to $13.2 million.

The Associated Press contributed to this report.