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Planet Fitness reported better than expected third quarter earnings after the close Thursday. The fitness center operator also raised guidance helping $PLNT stock rise over 7% after the report.

Planet Fitness Gym

Planet Fitness Inc NYSE: PLNT · Report Earnings After Close Thursday

$0.36 Beat Exp $0.35 EPS and $166.8 Beat $162.5 million forecast in revenue

Earnings

Planet Fitness (PLNT) reported net income attributable to the company of $25.8 million, or $0.31 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $17.5 million, or $0.20 per diluted share in the prior year period. Net income increased 45.0% to $29.7 million, compared to net income of $20.5 million in the prior year period. Adjusted net income increased 19.5% to $33.1 million, or $0.36 per diluted share, compared to $27.7 million, or $0.28 per diluted share in the prior year period. The results beat Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for earnings of 35 cents per share. PLNT posted revenue of $166.8 million in the period, also topping Street forecasts. Nine analysts surveyed by Zacks expected $162.5 million

Guggenheim reiterated its buy rating on the stock ahead of  the earnings, saying that despite the recent pullback the company’s fundamentals remain strong, and shares trade at an attractive valuation. “The company’s unique ability to produce 15-20% secular EBITDA growth while still generating $100-200 million of annual free cash flow over the next three to five years, by our estimates, merits a premium valuation to its growth-oriented peer group,” Guggenheim analyst John Heinbockel said in a October 28 note. He has an $85 target on the stock.

Planet Fitness Inc NYSE: PLNT

Market Reaction - After hours 67.50 +4.79 (7.64%)

Highlights

  • System-wide same store sales increased 7.9%.
  • Adjusted EBITDA increased 22.2% to $65.7 million from $53.8 million in the prior year period.
  • 41 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 1,899 as of September 30, 2019.
  • Franchise segment revenue increased $11.9 million or 21.7% to $66.7 million from $54.8 million in the prior year period, driven primarily by higher royalty revenue as a result of new stores opened since July 1, 2018, an 8.1% increase in same store sales, and a higher average royalty rate;
  • Corporate-owned stores segment revenue increased $5.3 million or 15.1% to $40.7 million from $35.4 million in the prior year period, $2.7 million of which is from corporate-owned stores opened or acquired since July 1, 2018, and another $1.4 million of which is from corporate-owned same store sales growth of 4.9%, and higher annual fee revenue of $1.1 million; and
  • Equipment segment revenue increased $12.9 million or 27.9% to $59.4 million from $46.4 million in the prior year period, driven by an increase in replacement equipment sales to existing franchisee-owned stores.

"We delivered another quarter of very solid results," stated Chris Rondeau, Chief Executive Officer. "High-single digit system-wide same store sales, combined with accelerated new store openings and our franchisees' continued commitment to re-equip their existing clubs with new equipment, fueled a 22% increase in total revenue. The third quarter was also highlighted by our highest-attended franchisee conference to date with over 1,500 attendees from across the system coming together to share ideas on how to strengthen the Planet Fitness brand, enhance the member experience and drive new member sign ups. Based on several factors including our experienced franchisees and their ability to execute, the significant amount of projected store expansion still ahead, and our increasing marketing spend, I am confident that the business is well positioned to drive continued growth and increased profitability."

2019 Outlook

For the year ending December 31, 2019, the Company now expects:

  • Total revenue to increase approximately 19% as compared to the year ended December 31, 2018, up from prior guidance of approximately 18%;
  • Total new store equipment sales in the high end of the range of 250 to 260;
  • System-wide same store sales of approximately 8.6%, up from prior guidance of approximately 8%;
  • Adjusted net income to increase approximately 21% as compared to the year ended December 31, 2018, up from prior guidance of approximately 20%; and
  • Adjusted net income per diluted share to increase approximately 28% to $1.56 as compared to the year ended December 31, 2018, up from prior guidance of approximately 26%.

About Planet Fitness

Founded in 1992 in Dover, NH, Planet Fitness is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations. As of September 30, 2019, Planet Fitness had more than 14.1 million members and 1,899 stores in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico. The Company's mission is to enhance people's lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which we call the Judgement Free Zone®. More than 95% of Planet Fitness stores are owned and operated by independent business men and women

From The Traders Community Research Desk

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