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Why Is Planet Fitness (PLNT) Up 2.7% Since Last Earnings Report?

·5 min read

It has been about a month since the last earnings report for Planet Fitness (PLNT). Shares have added about 2.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Planet Fitness due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Planet Fitness Q1 Earnings Top Estimates, Revenues Lag

Planet Fitness reported first-quarter 2022 results, wherein earnings beat the Zacks Consensus Estimate, but revenues missed the same. However, both the metrics improved on a year-over-year basis. The company benefited from increased membership levels and positive system-wide same store sales growth.

Earnings & Revenue Discussion

During the first quarter, the company reported adjusted earnings per share of 32 cents, surpassing the Zacks Consensus Estimate of 27 cents. In the prior-year quarter, the company reported adjusted earnings of 10 cents per share.

Quarterly revenues of $186.7 million fell short of the consensus mark of $188 million. The top line surged 66.9% from the year-ago quarter’s levels, driven by solid performances in the Franchise, Corporate-owned Stores and Equipment segments. During the quarter under review, system-wide same store sales increased 15.9% year over year compared with growth of 12.3% reported in the previous quarter.

Total adjusted EBITDA at the end of the first quarter was $77.3 million compared with $43.7 million in the year-ago quarter.

Segmental Performance

During first-quarter 2022, Franchise segment revenues were $80.1 million, up 25% year over year. The upside was driven by a $9.9 million rise in franchise royalty revenues, a $2.4 million gain in National Advertising Fund ("NAF") revenues, a $2.0 million growth in the franchise and other fees, and a $1.5 million surge in placement revenues.

EBITDA in the Franchise segment was $60.1 million compared with $41.2 million reported in the prior-year quarter.

The Corporate-owned Stores segment’s first-quarter revenues amounted to $76.2 million compared with $37.9 million in the prior-year quarter. The increase can primarily be attributed to a rise in same store sales. The acquisition of 114 stores through the Sunshine Fitness buyout contributed $28.7 million to the segment revenues. The segment’s EBITDA totaled $23.4 million compared with $10.7 million in the prior-year quarter.

In the Equipment segment, revenues totaled $30.4 million compared with $9.9 million in the prior-year quarter. The uptick was primarily driven by higher equipment sales to new and existing franchisee-owned stores. EBITDA in the Equipment segment was $8.7 million compared with $1.8 million in the prior-year quarter.

Other Financial Details

As of Mar 31, 2022, cash and cash equivalents totaled $471.2 million compared with $545.9 million as of Dec 31, 2021. Long-term debt (net of current maturities) amounted to $1,989.5 million at the end of first-quarter 2022 compared with $1,665.3 million at the prior-quarter end.

2022 Outlook

For 2022, the company continues to expect revenues to increase in the mid-50% range over the 2021 levels. Adjusted EBITDA for 2022 is estimated to rise in the high-50% range, while adjusted net income is anticipated at the low-90% range over the 2021 levels. The company anticipates adjusted EPS to increase in the mid-80% range over the 2021 levels. The metrics are based on the assumption of potential impact from the Sunshine Fitness acquisition and that there is no significant impact of the COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Planet Fitness has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Planet Fitness has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Planet Fitness is part of the Zacks Leisure and Recreation Services industry. Over the past month, Caesars Entertainment (CZR), a stock from the same industry, has gained 7.8%. The company reported its results for the quarter ended March 2022 more than a month ago.

Caesars Entertainment reported revenues of $2.29 billion in the last reported quarter, representing a year-over-year change of +34.9%. EPS of -$2.11 for the same period compares with -$2.06 a year ago.

Caesars Entertainment is expected to post earnings of $0.30 per share for the current quarter, representing a year-over-year change of -37.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Caesars Entertainment. Also, the stock has a VGM Score of B.


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