Why Weight Watchers International, Inc. Stock Popped Today

By Markets Fool.com

Image source: Weight Watchers International, Inc.

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What happened

Shares of Weight Watchers International (NYSE: WTW) were up 10% as of 2 p.m. EDT Friday, after the company released stronger-than-expected third-quarter 2016 earnings.

So what

Quarterly revenue climbed 2.7% year over year (4% at constant currency), to $280.8 million. This was driven in part by a 7% year-over-year increase in total paid weeks this quarter, but also by a 10% increase in end-of-period subscribers from last year's third quarter, to just over 2.83 million. Within that, meeting subscribers climbed 10.4%, to 1.22 million, while online subscribers grew 9.9%, to 1.62 million.

On the bottom line, that translated to net income of $34.7 million, or $0.53 per diluted share, up from $21.8 million, or $0.38 per share in the same year-ago period.

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By contrast, analysts' consensus estimates predicted Weight Watchers would achieve lower earnings of $0.45 per share, albeit on higher revenue of $287.9 million.

Now what

The company's bottom-line outperformance is particularly surprising considering the unexpected resignation during the quarter of Weight Watchers' now-former CEO, James Chambers.

"The search for our next CEO is progressing well," added Weight Watchers chairman of the board Ray Debbane. "We are pleased that the members of the Interim Office of the CEO are deeply involved in the business and providing strong leadership during the transition."

"We've seen a great response to our fall campaign and in Q3 we achieved our highest year-over-year percentage growth in recruitment so far this year," added Weight Watchers CFO Nick Hotchkin. "We continue to see positive reactions to our Beyond the Scale program, and we look forward to generating even more interest in Weight Watchers with our upcoming winter marketing campaign featuring Oprah Winfrey."

In the meantime, Weight Watchers now expects full-year 2016 per-share earnings to come in between $0.95 and $1.05, representing a $0.05-per-share increase from the lower end of its previous guidance range.

All things considered, this was a solid quarter from Weight Watchers, helping to quell uncertainty surrounding its executive transition. And it's hard to blame investors for so aggressively bidding up Weight Watchers stock today as a result.

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