A Q3 Preview To Whet NutriSystem Investors' Appetites

A week ahead of the third-quarter results announcement, Wunderlich boosted the target price on NutriSystem Inc. (NASDAQ: NTRI) from $31 to $37, implying about a 20 percent upside potential from current levels. The firm thinks that the company's initiatives are close to becoming reality. Thus, the firm reiterated its Buy rating on the stock.

Analyst Mitchell Pinheiro pointed out that NutriSystem delivered EPS beat in eight of the last nine quarters. He expects a similar trend in the third quarter. While he expects EPS of $0.25 compared to the company's forecast of $0.23–$0.28, Street analysts estimate EPS of $0.27.

While stating that core business momentum offered confidence, the brokerage expects the company to deliver 8 percent growth in revenue to $113 million compared to $113 million–$118 million outlook provided by the company. Consensus expects revenue of $116 million.

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In a research note, Wunderlich said, "The incremental growth for NTRI lies with the South Beach diet and Shake360 initiatives that have the potential to expand the addressable market while leveraging NTRI's infrastructure with strong incremental margins. We remain confident in NTRI's ability to execute on both initiatives and believe investors should own the stock ahead of 1Q17."

The brokerage pointed out that economic indicators provide positive and stable health of the consumer in the United States. Therefore, the risk factor is minimal.

The stock closed Tuesday's regular trading at $30.70 and was up 1.14 percent to $31.05 at last check Wednesday morning.

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