Why Medifast Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of weight-loss specialist Medifast were slimming down today, falling as much as 11% after the company provided weak guidance in its quarterly earnings report.

So what: The health-supplement maker actually beat earnings estimates in the quarter by $0.03 with a profit of $0.28 per share, and it delivered sales in line with estimates at $83.2 million, or a 20% increase from the year before. However, first-quarter guidance was significantly below expectations, as Medifast sees a per-share profit of just $0.32-$0.35 against estimates of $0.45. Part of the reason for the lower guidance was the shift in the Easter holiday, meaning the quarter will end two days earlier than last year. Full-year EPS guidance of $1.70 to $1.80 was in line with analysts' forecasts.

Now what:Considering that Medifast's 2013 guidance still matches analysts' estimates, today's drop seems unreasonable. Medifast is still growing at a steady pace, and shares look very affordable after today's drop. The stock recovered slightly, but was still down 7.3% by midday. The health-supplement sector has been under increased scrutiny lately after hedge fund manager Bill Ackman attacked Medifast rival Herbalife, calling it a pyramid scheme.

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The article Why Medifast Shares Dropped originally appeared on Fool.com.

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