Barclays On Weight Watchers: 'Still In Wait-And-See Mode'

• Weight Watchers International, Inc WTW shares are down 31 percent year-to-date, despite having climbed since October 19.
• Barclays’ Meredith Adler maintained an Equal-Weight rating on the company, while raising the price target from $14 to $17.
• The partnership with Winfrey may help Weight Watchers to attract new subscribers, but more clarity is required, Adler stated.

Weight Watchers has announced a partnership with Oprah Winfrey, wherein the celebrity will appear on the company’s website. Prior to this partnership, the company’s 3Q revenues, paid weeks and active subscriber numbers continued to decline, analyst Meredith Adler noted, adding that consumers have responded positively to the involvement of Oprah.

The company now expects to see positive recruitment in 4Q15, earlier than what it previously expected. Weight Watchers also plans to launch a new program focused on health and wellness and weight management. The details of the new program are expected in December, Adler said.

Weight Watchers reported its 3Q15 EPS at $0.39, beating expectation with strict expense control. Revenues were marginally short of the Barclays estimate. The company had $212 million of cash in hand at the end of the quarter and expects to end the year with $275 million.

Weight Watchers has adequate cash to repay the $144 million of B1 term loan maturing in March 2016, Adler mentioned. He added, however, that the company’s performance in 2016 will reflect a lower membership base than in 2015 and a $0.35 EPS hit before it attracts new members.

The EPS estimate for 4Q15 has been reduced from $0.07 to $0.03, while the EPS estimates for FY15 and FY16 have been raised from $0.71 to $0.74 and from $0.57 to $0.88, respectively.