Forget Earnings, Buy Weight Watchers International, Inc. (WTW) Stock for Its CEO

Weight Watchers International, Inc. (NYSE:WTW) announces its second-quarter earnings Thursday after the markets close. With WTW stock on a tremendous roll in 2017, up 212.1% year-to-date through Tuesday, investors are clamoring for more good news to keep the party going.

Forget Earnings, Buy Weight Watchers International, Inc. (WTW) Stock for Its CEO

Well, when it comes to earnings, I can’t tell you much more than what analysts are expecting from Q2, but I can tell you why I think Weight Watchers will continue to do well in fiscal 2017, regardless of today’s price action or what Thursday’s announcement brings.

The Earnings

We already know that Weight Watchers raised its FY 2017 EPS guidance in early May to $1.45 per share at the midpoint. That’s 40.8% higher than 2016, and while it’s considerably lower than the $4.23 per share achieved in 2012, it’s a step in the right direction.

Analysts expect Q2 2017 revenues and earnings of $329.6 million and 51 cents per share, year-over-year growth of 6.4% and 10.9%, respectively. Frankly, with a just handful of analysts covering WTW stock, I’d be more inclined to follow company guidance and not get too caught up in what analysts are projecting.

With Oprah on board, Weight Watchers is a company in transition.   

A New Sheriff in Town

At the end of April, Weight Watchers announced that Mindy Grossman would take over as CEO in July, replacing former CEO James Chambers who resigned from the company last fall.

If you don’t know Grossman’s career in business, it’s a long and fruitful one. I named her one of the four best female CEOs to bet on back in 2014, and although her former company, HSN, Inc. (NASDAQ:HSNI), has struggled in recent quarters, she did a great job for shareholders.

Taking the helm of the Home Shopping Network in May 2006, HSNI’s been a public company since August 2008 when it was spun off from IAC/InterActiveCorp (NASDAQ:IAC). In nearly nine years as a public company, HSNI stock gained 206.8% through her last day on May 24, more than double the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). 

WTW Valuation

Based on Weight Watchers’ $1.45 estimate for 2017, WTW stock is trading at 24.6 times earnings. If in the future it were to get back to the $4.23 earnings per share from 2012, its forward price-earnings ratio today is 8.4, lower than it’s been at any time in the past decade except for 2013.

It might take three years to get there, but if it does and as a result of improving earnings WTW stock sees some multiple expansion, a doubling of its stock price is entirely possible, in fact, probable.

Bottom Line on WTW Stock

Oprah Winfrey, who owns 14.7% of WTW stock, isn’t prone to making a lot of mistakes. The fact that she’s so enthusiastic about Grossman’s hiring is a significant indication the WTW board did a thorough job replacing Chambers.

“Mindy is proven as a successful visionary and entrepreneurial force in business and I look forward to working with her,” Oprah Winfrey stated in April on Grossman’s hiring. “She has the experience, the passion and the positive energy to take Weight Watchers to exciting new places.”

If you’re not a shareholder, you should be, because no matter what the earnings are, Grossman will earn her pay in the years ahead.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

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