Channel Checks Suggest Planet Fitness Getting In Great Shape To Start The Year

Planet Fitness Inc PLNT is scheduled to report its Q4 2016 results on February 3. Checks and data indicate a positive start to 2017, Imperial Capital’s George Kelly said in a report. He maintains an Outperform rating on the company, while reducing the price target from $26 to $24.

The Q4 2016 revenue estimate has been raised from $110 million to $113 million. The EPS estimate for 2017 has been reduced from $0.76 to $0.71.

Kelly mentioned that the Q4 2016 and 2017 estimates had been adjusted to reflect a special dividend of $2.78 per share that Planet Fitness had paid on December 5, 2016, funding this partly from $230 million in incremental borrowings, as well as a slower ramp in operating expenses in 2017. Moreover, a slightly higher take rate has been included in the estimates.

What 2017 May Look Like

Referring to the earnings call, Kelly wrote, “We believe most attention will be on management’s 2017.” He expects 180 new stores to be opened in the year and believes members per store will remain relative flat.

The analyst also expects equipment sales to remain flat at $153 million. He believes the company’s incremental margins will improve due to the growing contribution from the franchise business.

Kelly said recent gym visits and data from Google Trends indicate a positive start of 2017. He added that the stock deserved to trade at a premium to fitness peers in view of Planet Fitness’s “long-term unit growth opportunity, strong brand, and high incremental margin.”