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Planet Fitness (PLNT) Q4 Earnings Top, Stock Down on Soft View

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Planet Fitness, Inc. PLNT reported fourth-quarter 2019 results, wherein both earnings and revenues beat the respective Zacks Consensus Estimate. Following this result, the bottom line has surpassed the consensus mark for 19th straight quarter, while the top line has outpaced the same for the third consecutive quarter.

Notably, both earnings and revenues also improved on a year-over-year basis. Quarterly results were driven by robust system-wide same-store sales growth and 102 store openings.

Despite reporting better-than-expected results, the company’s shares declined 5.6% in after-hour trading session yesterday as the company’s 2020 outlook hurt investor sentiment. However, the company’s shares have gained 38.9% in the past year against the industry’s decline of 15.3%.

Quarterly Discussion in Details

Adjusted earnings came in at 44 cents per share, which outpaced the consensus mark of 41 cents. The bottom line also improved 29.4% on a year-over-year basis.

Meanwhile, revenues of $191.5 million surpassed the Zacks Consensus Estimate of $189 million and surged 9.8% on a year-over-year basis. The top line was driven by sharp increase in the franchise and corporate-owned stores. System-wide same-store sales improved 8.6% year over year in the quarter under review.

Franchise revenues increased 27.9% to $58.5 million and the Corporate-owned Stores segment’s revenues climbed 13.7% year over year to $41.2 million. In the Equipment segment, revenues declined 5.6% to $77 million owing to decreasing sales of replacement equipment, which offset increase in equipment sales to new stores.

Moreover, EBITDA in the Franchise segment improved 30.8% to $50.7 million owing to rise in royalties from new franchised stores and increase in same-store sales. At the Corporate-owned stores segment, EBITDA increased 3.6% to $51.1 million. However, the same declined 1.7% to $18.7 million at Equipment segment.

Total adjusted EBITDA at the end of the fourth quarter rose to $76.6 million from $62.3 million in the year-ago quarter.

Planet Fitness, Inc. Price, Consensus and EPS Surprise

Other Financial Details

As of Dec 31, 2019, cash and cash equivalents totaled $436.3 million compared with $289.4 million as of Dec 31, 2018. Long-term debt, net of current maturities, amounted to $1,687.5 million at the end of fourth-quarter 2019 compared with $1,160.1 million at 2018 end.

2020 Outlook

For 2020, Planet Fitness expects revenue growth of nearly 12% year over year. The Zacks Consensus Estimate for revenue growth is currently pegged at 14.4%.

System-wide same-store sales are likely to increase nearly 8%. Furthermore, the company anticipates adjusted net income and earnings per share to increase 10% and 16%, year over year, respectively.

Zacks Rank & Stocks to Consider

Planet Fitness has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks worth considering in the leisure space include American Outdoor Brands Corporation , Malibu Boats, Inc. (MBUU - Free Report) and Brunswick Corporation BC. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of American Outdoor Brands have gained 18.3% in the past three months.

Shares of Malibu Boats have gained 13.9% in the past three months.

Brunswick has an impressive long-term earnings growth rate of 10%.

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