It has been about a month since the last earnings report for Planet Fitness (PLNT). Shares have added about 10.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Planet Fitness Q3 Earnings Surpass Estimates, Rise Y/Y
Planet Fitness reported impressive third-quarter 2022 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The metrics increased on a year-over-year basis.
Earnings & Revenue Discussion
During the third quarter, the company reported adjusted earnings per share (EPS) of 42 cents, beating the Zacks Consensus Estimate of 39 cents. In the prior-year quarter, the company reported an adjusted EPS of 25 cents.
Quarterly revenues of $244.4 million beat the consensus mark of $237 million. However, the top line surged 58.4% 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 8.2% year over year compared with growth of 13.6% reported in the previous quarter.
Total adjusted EBITDA at the end of the third quarter was $93.9 million compared with $61.7 million reported in the year-ago quarter.
During third-quarter 2022, Franchise segment revenues were $80.7 million, up 7.1% year over year. The upside was driven by a $2.8 million rise in franchise royalty revenues, a $0.7-million gain in National Advertising Fund (NAF) revenues and a $1.7-million surge in equipment placement revenues.
EBITDA in the Franchise segment was $53.5 million compared with $52 million reported in the prior-year quarter.
The Corporate-owned Stores segment’s third-quarter revenues amounted to $101.3 million compared with $43.9 million reported in the prior-year quarter. The increase can primarily be attributed to a rise in same-store sales and new store openings. The acquisition of 114 stores through the Sunshine Fitness buyout contributed $50.4 million to the segment’s revenues. The segment’s EBITDA totaled $40.4 million compared with $14.1 million reported in the prior-year quarter.
In the Equipment segment, revenues totaled $62.3 million compared with $35 million reported in the prior-year quarter. The uptick was primarily driven by higher equipment sales to existing franchisee-owned stores. EBITDA in the Equipment segment was $15.8 million compared with $7.9 million reported in the prior-year quarter.
Other Financial Details
As of Sep 30, 2022, cash and cash equivalents totaled $404.5 million compared with $383.5 million as of Jun 30, 2022. Long-term debt (net of current maturities) amounted to $1,982.2 million at the end of third-quarter 2022 compared with $1,985.7 million at the prior-quarter end.
For 2022, the company continues to expect revenues to increase in the high-50 percent range year over year, up from the previous projection of a mid-50 percent range. Adjusted EBITDA for 2022 is estimated to rise approximately 60% year over year compared with the previous expectation of a high-50 percent range. Adjusted net income is anticipated at the low-100% range (over the 2021 levels) compared with the previous expectation of a low-90% range. The company anticipates adjusted EPS to increase in the mid-90% range year over year compared with the previous projection of a mid-80% range. 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?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.91% due to these changes.
At this time, Planet Fitness has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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 belongs to the Zacks Leisure and Recreation Services industry. Another stock from the same industry, Caesars Entertainment (CZR), has gained 14.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Caesars Entertainment reported revenues of $2.89 billion in the last reported quarter, representing a year-over-year change of +7.5%. EPS of $0.24 for the same period compares with -$1.08 a year ago.
For the current quarter, Caesars Entertainment is expected to post earnings of $0.13 per share, indicating a change of +111.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +3.3% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Caesars Entertainment. Also, the stock has a VGM Score of A.
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