Why Life Time Fitness Shares Sank
Feb 1st 2013 4:15PM
Updated Feb 1st 2013 4:35PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of fitness club operator Life Time Fitness plummeted 21% today after its preliminary fourth-quarter results and outlook disappointed Wall Street.
So what: Life Time shares have risen over the past few months on optimism over a rebound in memberships, but today's preliminary fourth-quarter results -- EPS of $0.53 to $0.56 versus the consensus of $0.65 -- coupled with downbeat guidance for 2013 naturally squashes that hope. In fact, Life Time experienced higher-than-expected membership acquisition costs during the quarter in addition to the lower-than-expected membership growth, forcing analysts to recalibrate their growth expectations considerably.
Now what: Management now expects 2013 EPS of $2.85 to $2.95 on revenue of $1.2 billion to $1.22 billion, below the consensus of $3.17 and $1.24 billion. "The Company's preliminary guidance includes the anticipated impact of the timing of 2013 new center openings, pre-sale expenses for centers opening in early 2014 and the investment in growth initiatives," wrote Life Time in a statement. So while the beaten-down stock might be tempting for short-term traders to pounce on, Life Time's still-shaky financial and competitive position make it a highly questionable long-term opportunity.
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The article Why Life Time Fitness Shares Sank originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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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