Why Is Planet Fitness (PLNT) Down 33.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Planet Fitness (PLNT). Shares have lost about 33.6% 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 and Revenue Beat Estimates

Planet Fitness, 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.

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.

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.

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 -8.92% due to these changes.

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 an F. Charting a somewhat similar path, 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 D. 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.