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39 Pull-Ups for Planet Fitness Stock

By Rick Munarriz – Oct 27, 2016 at 5:06PM

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The low-cost gym operator busts through expectations again, just the way it has always done since going public at $16 last year.

Image source: Planet Fitness.

When it comes to workouts, repetition is often the key. Planet Fitness (PLNT 1.25%)seems to get it. Shares of the company behind the value-priced gym moved nicely higher on Thursday following another blowout quarter.

Revenue for the gym operator's third quarter is checking in at $87 million, 26.4% ahead of the prior-year's showing. Expansion played a starring role in that growth spurt.

Franchisees opened 37 news stores during the quarter, taking the store count to 1,242. There were just 1,040 locations open a year ago. However, the more impressive contributor to Planet Fitness' robust top-line gain is the 10% surge in same-store sales. 

Comps tend to be a finicky metric for gym operators. There's seasonality from quarter to quarter, but even on a year-over-year basis, you have economic and social trends that tend to push fitness centers in and out of consumer fancy.

Planet Fitness is killing it on that front. It has now rattled off 39 consecutive quarters of positive comps, and that's a lot of pull-ups in any workout regimen. When store-level sales have consistently grown for nearly 10 years, it's fair to say that this is more than just a fad. 

The beauty of the Planet Fitness model is that it's scalable. As more franchisees sign up, the steady support costs at the corporate level remain pretty constant. A 26% uptick in revenue translated, in this quarter, to a 33.5% surge in adjusted EBITDA and a 51.7% pop in earnings.

The chain's adjusted profit of $15.9 million or $0.16 a share blasted through Wall Street's target of $0.13 a share. Planet Fitness has mastered the art of exceeding analyst expectations. It has beaten Wall Street profit forecasts by a double-digit percentage margin every quarter as a public company.

Flexing because it can

The streak of 39 quarters of positive comps is more impressive than its streak of blowing through analyst earnings projections, but only because Planet Fitness just went public at $16 last summer. It has had only five reporting periods to make Wall Street pros look like serial low ballers. 

Planet Fitness, and its $10 a month value proposition, is resonating with consumers who can do without the swimming pools, group fitness classes, and day care centers offered by major chains charging several times more. There are other bargain-priced options, but Planet Fitness and its fleet of treadmills, elliptical machines, and other workout gear is clicking for folks looking for a cost-effective workout solution. 

The strong showing finds Planet Fitness once again putting more weight on its barbell. It's now targeting $0.66 to $0.67 a share in adjusted earnings for all of 2016. Three months ago, the outlook there was for adjusted net income of $0.63 to $0.66 a share. Its top-line forecast has gone from between $366 million and $372 million this year to between $373 million and $378 million. 

Planet Fitness is a workout beast. For now, the stock is working out for investors like a beast.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Planet Fitness. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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