On Nov 28, Zacks Investment Research upgraded Weight Watchers International, Inc. WTW to a Zacks Rank #1 (Strong Buy). The weight management service operator has been witnessing an upward trend in earnings estimates ever since management issued optimistic growth outlook at the Global Consumer & Retail conference on Nov 17. Further, shares of Weight Watchers have gained more than 12% since then.
Why the Upgrade?
In October, Weight Watchers announced its long-term affiliation with popular media proprietor and talk show host, Oprah Winfrey. Per the deal, Winfrey made a substantial equity investment in the company and joined the board. Winfrey bought a 10% stake in the company and received options to acquire an additional 5% of the fully diluted shares.
The company’s stock price has now nearly doubled since the deal was announced, and investors seem to be extremely optimistic. The positivity surrounding the deal led management to raise the full-year 2015 earnings per share outlook to a range of 64 cents to 74 cents, from 57 cents to 72 cents, during the third-quarter conference call.
Despite declining membership, Weight Watchers reported stabilizing recruitment trends in the last quarter. At that time, the company stated that it expects global recruitments to be positive in the fourth quarter, driven by the Winfrey deal. This positive outlook was reaffirmed at the Global Consumer & Retail conference.
Stocks to Consider
Another stock in the same sector that can be considered is Outerwall Inc. OUTR carrying a Zacks Rank #2 (Buy).
In the broader consumer discretionary sector China Lodging Group, Limited HTHT and Extended Stay America, Inc. STAY are worth a look. While China Lodging Group sports a Zacks Rank #1, Extended Stay has a Zacks Rank #2.
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