Weight Watchers plunged 14% to $34.31 in after-hours trading following an unexpectedly negative 2014 forecast. The weight-management company said it expects a "challenging" year ahead as revenue continues to be buffeted by waning new memberships.
"While we are working aggressively on both near-term commercial activities and longer-term strategic initiatives, 2014 will be a very challenging year. To maintain financial flexibility and fund the company's transformation, the board has elected to suspend the dividend," said CEO Jim Chambers in a statement.
The New York-based company reported third-quarter earnings of $1.07 a share on revenue 8.5% lower than a year earlier of $393.9 million. Analysts surveyed by Yahoo! Finance had expected 84 cents a share on $386.5 million. Management said cost-cutting measures allowed the business to surpass third-quarter expectations but that the trend will not extend to the fourth quarter.
"While progress on cost cutting has allowed us to exceed our Q3 expectations, we expect Q4 revenues to be down low double digits," said Chambers.
TheStreet Ratings team rates WEIGHT WATCHERS INTL INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate WEIGHT WATCHERS INTL INC (WTW) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow."
- You can view the full analysis from the report here: WTW Ratings Report