At nearly 14-month highs thus far on the session, share of Weight Watchers (WTW 18.52, +4.13 +28.7%) are still a far cry away from all-time highs north of $86 per share dating back to the spring of 2011, yet trade at a nice clip following the mixed Q4 print and favorable FY17 guidance from last night.
Specifically for Q4, WTW reported strength across the board with end of period subscribers, total paid weeks and revenues all growing on a year-over-year basis. On the bottom line, WTW reported better than expected earnings per share (EPS) of $0.20 on revenues which grew about 3.2% compared to a year ago and were slightly worse than market expectations at $267.4 million. Management also commented on the conference call that the current CEO search remains on track.
Service revenue growth outpaced product sales and other revenues, as is typical for WTW. Service revenues were $221.2 million in the period, up 5.7% on a constant currency basis aided by an 8.8% increase in revenues from North America. Product sales and other revenues were $46.2 million, a 2.2% increase compared to this time last year, driven again by gains in North America.
Additionally, WTW reported Q4 end of period subs growth of 9.7% versus the prior year period, mostly driven by continued recruitment growth in North America where End of Period Subscribers increased 12.3%. Q4 2016 End of Period Meeting Subscribers was also strong in Q4, up 10.4% and End of Period Online Subscribers was up 9.2% versus the prior year period.
Total paid weeks in Q4 2016 were up 10.1% versus the prior year period. Furthermore, Q4 2016 Meeting Paid Weeks increased 9.6% and Online Paid Weeks increased 10.5%. These gains were led by strength in North America where Total Paid Weeks grew 13.2% in Q4 2016.
Management also highlighted soft trends in the UK, though stated that the year-over-year declines across the pond have slowed thus far in 2017 versus 2016. Also in the UK, while the Meetings business remains strong, WTW does not anticipate an immediate turnaround.
Looking ahead, WTW sees FY17 EPS in the range of $1.15-1.25, excluding a $0.15 tax benefit which is expected in Q1 related to the cessation of WTW’s Spanish subsidiary. Further, WTW expects revenue momentum to build throughout the year with Online growing faster than Meetings, leading to FY revenues in 2017 of about $1.25 billion. Also, on the conference call last night, WTW highlighted that Q1 global member recruitment is so far up in the double-digits with good performance from the Meetings business, coupled with strength in Online. For Q1, including the impact of Spain, WTW sees EPS slightly positive.
Entering Wednesday’s action, shares were up about +14% during the prior two sessions and have risen about +23% in the last year.