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Planet Fitness (PLNT) Down 1.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Planet Fitness (PLNT - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.

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

Planet Fitness Q4 Earnings & Revenues Miss Estimates

Planet Fitness reported dismal fourth-quarter 2020 results, with earnings and revenues missing the Zacks Consensus Estimate. Further, the metrics declined sharply year over year due to the coronavirus pandemic.

However, management stated that the company is witnessing net member growth and improved usage on the back of its marketing activities. Going forward, the company intends to focus on expanding its store footprint and digitalization to boost its fitness offerings. Also, the company is optimistic about long-term growth opportunities, given the continuity in vaccine rollouts.

Quarterly Details

The company reported adjusted earnings per share (EPS) of 17 cents, which missed the Zacks Consensus Estimate of 23 cents by 26.1%. In the prior-year quarter, the company had reported adjusted EPS of 44 cents.

Quarterly revenues of $133.8 million lagged the consensus mark of $139 million by 3.7%. The top line also declined 30.1% from the year-ago quarter’s levels primarily due to the dismal performance across the Franchise, Corporate-owned Stores and Equipment segments.

Franchise segment revenues fell 8.8% year over year to $66.9 million. The downside was primarily caused by temporary store closures owing to COVID-19, lower membership levels and equipment placement revenues. However, this was partially offset by higher royalties on annual fee billings.

The Corporate-owned Stores segment’s revenues fell 5.6% year over year to $38.9 million. The decline was mainly due to temporary store closures and reduced membership levels owing to the pandemic. However, this was partially offset by revenues accumulated from the acquisition of 12 franchisee-owned stores (in December 2019) and the opening of nine new corporate-owned stores (since Oct 1, 2019).

In the Equipment segment, revenues plunged 63.7% year over year to $28 million on account of lower equipment sales to new and existing franchisee-owned stores. Also, extensions for all new store development (12 to 18-months) and re-equipment investment obligations lead to the downtrend.

Moreover, EBITDA in the Franchise segment declined 14.1% year over year to $43.6 million. The decline was primarily caused by temporary shutdowns owing to COVID-19 and decline in membership levels. At the Corporate-owned stores segment, EBITDA fell 18.6% year over year to $12.3 million. EBITDA in the Equipment segment slumped 83.2% year over year to $3.1 million.

Total adjusted EBITDA at the end of the fourth quarter deteriorated to $51.1 million from $76.6 million in the year-ago quarter.

Other Financial Details

As of Dec 31, 2020, cash and cash equivalents totaled $439.5 million compared with $436.3 million as of Dec 31, 2019. Long-term debt (net of current maturities) amounted to $1,676.4 million at the end of fourth-quarter 2020 compared with $1,687.5 million at 2019-end.

2020 Highlights

Total revenues in 2020 came in at $406.6 million compared with $688.8 million in 2019.

Adjusted EBITDA in 2020 came in at $120.4 million compared with $282.2 million in 2019.

In 2020, adjusted diluted EPS came in at 4 cents compared with $1.59 in the previous year.

2021 Outlook

Owing to the uncertainty tied to the crisis, the company did not provide any guidance for 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -39.46% due to these changes.

VGM Scores

Currently, Planet Fitness has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Planet Fitness has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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