NEW YORK (TheStreet) -- Shares of Weight Watchers International (WTW) are dropping 2.19% to $4.91 on Friday after analysts at Credit Suisse lowered their price target to $4 from $5 and maintained their "underperform" rating.
The firm cited that shares have declined 35% since the company reported first quarter earnings in early May, and investors continue to have concerns around the company's ability to return to recruitment growth and meet debt maturities in 2016 and 2020, amidst ongoing cost-cuts.
For the first quarter 2015, the New York-based company reported revenue of $322.1 million, or loss of 9 cents per shares, compared to revenue of $327.8 million or profit of 7 cents per share in the same quarter last year.
The company was expected to report revenue of $322.5 million or loss of 19 cents per share, according to analysts polled by Thomson Reuters.
Additionally, the company has debt of about $2.3 billion and a business model that has struggled to keep up with contemporary trends as dieters' habits are changing, The Wall Street Journal reported.
The millennial generation now prefers to eat healthy and regularly exercise instead of participating in weight loss programs, the Journal noted.
Separately, TheStreet Ratings team rates WEIGHT WATCHERS INTL INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate WEIGHT WATCHERS INTL INC (WTW) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WEIGHT WATCHERS INTL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, WEIGHT WATCHERS INTL INC reported lower earnings of $1.74 versus $3.63 in the prior year. For the next year, the market is expecting a contraction of 67.8% in earnings ($0.56 versus $1.74).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Consumer Services industry. The net income has significantly decreased by 125.2% when compared to the same quarter one year ago, falling from $21.53 million to -$5.43 million.
- Net operating cash flow has significantly decreased to -$7.43 million or 109.19% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 76.87%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 126.31% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- WTW, with its decline in revenue, underperformed when compared the industry average of 0.5%. Since the same quarter one year prior, revenues fell by 21.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: WTW Ratings Report