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Why Is Planet Fitness (PLNT) Up 18.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Planet Fitness (PLNT - Free Report) . Shares have added about 18.8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Planet Fitness Q3 Earnings Beat Estimate

Planet Fitness reported third-quarter 2019 results, with earnings and revenues surpassing the Zacks Consensus Estimate. With this, earnings outpaced the consensus mark for the eighteenth straight quarter.

Notably, the top and the bottom line registered an improvement on a year-over-year basis. Quarterly results were driven by robust system-wide same-store sales growth as well as 41 store openings.

Adjusted earnings came in at 36 cents per share, which outpaced the consensus mark by a penny. The bottom line also increased 28.6% on a year-over-year basis.

Meanwhile, revenues of $166.8 million surpassed the Zacks Consensus Estimate of $162 million and surged 22.1% on a year-over-year basis. The top line was driven by sharp increase in the franchise, corporate-owned stores and equipment revenues. System-wide same-store sales increased 7.9% year over year in the quarter under review.

Franchise revenues increased 21.7% to $66.7 million and the Corporate-owned Stores segment’s revenues surged 15.1% year over year to $40.7 million. In the Equipment segment, revenues rose 27.9% to $59.4 million owing to a rise in equipment sales to new stores and sales of replacement equipment.

Moreover, EBITDA in the Franchise segment improved 19.6% to $44.3 million owing to a rise in royalties from new franchised stores and increase in same-store sales. At the Corporate-owned stores and Equipment segments, EBITDA increased 9.9% and 42.3% to $16.8 million and $13.7 million, respectively.

Total adjusted EBITDA at the end of the third quarter rose to $65.7 million from $58.8 million in the year-ago quarter.

Other Financial Details

As of Sep 30, 2019, cash and cash equivalents totaled $219.8 million compared with $289.4 million as of Dec 31, 2018. Long-term debt, net of current maturities, amounted to $1,155 million at the end of third-quarter 2019 compared with $1,160.1 million at 2018 end.

2019 Outlook

For 2019, Planet Fitness expects revenue growth of nearly 19% year over year compared with the prior estimate of 18% rise. System-wide same-store sales are likely to increase nearly 8.6% compared with the prior estimate of 8%.

Furthermore, the company anticipates adjusted net income and earnings per share to increase nearly 21% in the current year, up from the previous estimate of 20%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Planet Fitness has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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 C. 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. Notably, Planet Fitness has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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