Planet Fitness (PLNT -1.18%) hit fresh all-time highs on Friday, soaring after yet another blowout quarter. The strong financial update isn't going unnoticed by Wall Street pros. Baird analyst Jonathan Komp is boosting his price target from $50 to $56, suggesting that more fresh highs will be on the way.
The discount-gym operator continues to resonate with mainstream audiences looking to score affordable access to workout gear at an easily accessible and unpretentious fitness center. Planet Fitness members pay as little as $10 and no more than $22 a month, and it's been a winning formula for Planet Fitness and its investors. The stock has more than tripled since going public at $16 three summers ago.
Working out
Revenue soared 31%, to hit $140.6 million, fueled by brisk expansion and a hearty 10.2% surge in comps. Some chains that crank out strong same-store sales are often doing so on the back of depressed results a year earlier, but that's not the case with Planet Fitness. Comps rose 9% during the second quarter of 2017. They say that gyms have their ups and downs, but Planet Fitness has cranked out positive comps for 46 consecutive quarters.
Image source: Planet Fitness.
The bottom line is growing faster, something that shouldn't come as a surprise, given the scalable nature of the business. Adjusted earnings rose 53%, to hit $33.2 million, or $0.34 a share, though a lower normalized federal income tax rate this time around is naturally helping. Analysts were once again a few reps behind Planet Fitness. Wall Street was settling for an adjusted profit of $0.31 a share on $131 million in revenue.
Analysts now have to break a sweat and catch up. Komp at Baird is likely the first of many who will juice up their price targets to keep up with the stock's momentum and the company's improving fundamentals. Komp is sticking to his bullish outperform rating, once again impressed by the better-than-expected comps and unit growth.
Planet Fitness doesn't offer up quarterly guidance, but its full-year outlook is getting brighter on the top line. It now sees revenue growing 26% for all of 2018, up from its target of 20% just three months earlier. The fast-growing fitness-center operator also sees comps in the 9% to 10% range, up from its earlier goal of "high single digit" growth in same-store sales. It's hosing down its projected adjusted earnings growth -- going from 40% to 33% -- but that's largely the result of higher interest expense following a recent debt refinancing.
Investors are happy. Planet Fitness has thrived, making the most out of the retail apocalypse. It will keep growing -- it's up to 1,608 locations now -- attracting more franchisees with its jaw-dropping streak of positive comps and wooing landlords looking to fill vacant strip-mall space with a thriving business that draws a large number of guests throughout the day. It's in the right place at the right time, and shareholders probably feel the same way.
