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Planet Fitness (PLNT) Up 3.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Planet Fitness (PLNT). Shares have added about 3.4% 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 catalysts.

Planet Fitness Q2 Earnings Miss Estimates

Planet Fitness reported second-quarter 2021 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same.

Nonetheless, the company is optimistic about growth on the back of changing market dynamics and tailwinds behind the health and wellness. Chris Rondeau, CEO, Planet Fitness, stated, “We believe Planet Fitness is the place that fills that gap with our affordable, non-intimidating workout environment, and, as a result, we are confident in achieving and possibly exceeding our long-term target of 4,000 locations in the U.S."

Earnings & Revenues Discussion

During the second quarter, the company reported adjusted earnings per share (EPS) of 21 cents, which missed the Zacks Consensus Estimate of 22 cents by 4.6%. In the prior-year quarter, the company reported adjusted loss of 32 cents per share.

Total adjusted EBITDA at the end of the second quarter came in at $55.6 million against ($9.3) million reported in the year-ago quarter.

Quarterly revenues of $137.3 million beat the consensus mark of $123 million by 11.7%. The top line also surged 241.1% from the year-ago quarter’s levels on account of solid performances in the Franchise, Corporate-owned Stores and Equipment segments.

Segmental Performance

During second-quarter 2021, Franchise segment revenues came in at $72.8 million compared with $21 million in the prior year quarter. The upside was primarily driven by a rise in franchise royalty revenues ($37.7 million), NAF revenues ($8.3 million), franchise and other fees ($5 million). EBITDA in the Franchise segment came in at $51.8 million compared with $3.5 million in the prior-year quarter.

The Corporate-owned Stores segment’s revenues during the second quarter came in at $40.6 million compared with $9.4 million in the prior-year quarter. The upside was primarily driven by the resumption of operations at its temporarily-closed stores along with the revenues accumulated from the opening of seven new corporate-owned stores (since Apr 1, 2020). Meanwhile, the segment EBITDA came in $10.4 million against ($6.3) million reported in the prior-year quarter.

In the Equipment segment, revenues during the quarter came in at $23.8 million compared with $9.8 million in the prior-year quarter. The uptick was primarily driven by higher equipment sales to new and existing franchisee-owned stores. EBITDA in the Equipment segment came in at $5.6 million compared with $1.3 million in the prior-year quarter.

Other Financial Details

As of Jun 30, 2021, cash and cash equivalents totaled $469.1 million compared with $445.6 million as of Mar 31, 2021. Long-term debt (net of current maturities) amounted to $1,670.8 million at the end of second-quarter 2021 compared with $1,673.6 million at prior-quarter end.

2021 Outlook

For 2021, the company expects revenues in the range of $530-$540 million. Selling, General & Administrative expenses are anticipated in the lower $90-million range. Adjusted EBITDA for 2021 is estimated between $200 million and $210 million. Adjusted net income per share, diluted, for 2021 is anticipated between 65 cents and 70 cents. The metrics are based on the assumption that there is no significant worsening of the COVID-19 pandemic that seriously impacts performance, including prolonged store closures or other mandated operational restrictions.

Meanwhile, the company anticipates new store openings in 2021 to be at the high-end of 75-100 range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -33.41% due to these changes.

VGM Scores

At this time, Planet Fitness has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. It's no surprise Planet Fitness has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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