Life Time Fitness (LTM) Plunges on Bleak Fourth Quarter Warning
Shares of fitness club Life Time Fitness (LTM: Charts, News) plunged 21% after it released fourth quarter earnings that fell short of Wall Street forecasts. The Chanhassen, Minnesota-based company now expects to earn 53 to 56 cents per share, missing the consensus estimate of 65 cents.
It also offered a bleak forecast for fiscal 2013, reducing its annual EPS to a range between $2.85 to $2.95 per share, on $1.2 billion to $1.22 billion in revenue. Analysts had expected Life Time to earn $3.17 per share on revenue of $1.24 billion. The company attributed its lackluster results and guidance to lower-than-expected membership growth coupled with higher-than-expected membership acquisition costs. Daily Chart
Life Time operates mainly in suburban locations across 26 areas in North America. At the end of last year, its fitness clubs had nearly 1.3 million members. Investors had expected the company to recover this year, but the bleak warning crushed those hopes. The company stated that its guidance for the coming year accounts for new center openings, pre-sale expenses and growth initiatives. Life Time also attributed its increased expenses to Hurricane Sandy, self-insured expenses and the launch of its PR initiative, Commitment Day. Commitment Day was the company's attempt to start a year-round movement starting on January 1, encouraging participants to eat healthy food and exercise. The costly inaugural initiative failed to increase memberships. Looking ahead, Life Time plans to open three new centers in 2013, despite high costs and shrinking margins. The decision to move ahead and expand follows its canceled project in Mount Laurel, New Jersey, which was abandoned after a dispute with a building contractor. Life Time also recently announced that it was planning a large 127,000 square feet sports/spa resort facility in Laguna Niguel, California. The company currently operates 105 centers in North America, with no international exposure. Up to the fourth quarter, Life Time had been a successful growth story, with 60.45% revenue growth and 41.3% earnings growth over the past five years. This contributed to a 251% surge in cash and equivalents over that period. However, rapid growth also led to loose financial controls and increased expenses. During this time, expenses rose 61.5%, cutting into operating margins, which slipped 13.3%. However, its debt-to-equity ratio has fallen 41%, which suggests that the company is still spending responsibility, despite more expansion expenses on the horizon. However, analysts have been losing faith in Life Time. Feltl & Co. analysts remained bullish on the stock but urged caution, downgrading the stock from "strong buy" to "buy." Analysts at William Blair were more bearish, downgrading the stock from "outperform" to "market perform." Shares of Life Time fitness trade at 13.2 times forward earnings with a PEG ratio of 0.89. The stock is down over 22% the past twelve months. The stock does not pay a dividend. The company reports its full fourth quarter earnings on February 21. Other News About LTM Life Time Fitness Shares Down After Revenue Warning, Downgrade
Life Time plunges more than 20%. LTM
)+to+Market+Perform/8050249.html" rel="nofollow" target="_blank">William Blair Downgrades Life Time Fitness to Market Perform Several analysts downgrade the rapidly growing company. Other Stocks in the News Video Game Industry Can't Catch a Break
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Published on Feb 4, 2013
By Leo Sun