Life Time Fitness In Bad Shape After Weak Quarterly Results

Life Time Fitness (LTM) pre-announced a bad quarter and gave a weak outlook for 2013 sending the stock from 52-week highs to 52-week lows.

The most recent quarter excluded $0.07 per share due to the effects of Super Storm Sandy. The company faced a street estimate of $0.66 but guided estimates to between $0.60-$0.63, and also took down guidance for 2013.

Life Time operates sports and athletic, professional fitness, family recreation, and spa centers. As of February 28 it operated 105 centers under the Life Time Fitness and Life Time Athletic brands in the United States and Canada. Life Time Fitness, Inc. was founded in 1990 and is headquartered in Chanhassen, Minnesota.

One look at a price chart of LTM and you can see why guiding lower can really hurt a stock. The most recent quarter will go down as a beat, with the company topping the refined Zacks Consensus Estimate by $0.01 about three weeks after LTM warned that it would not meet Wall Street expectations.

The December 2011 quarter saw a similar problem, but this time it was a just a straight miss. LTM reported earnings of $0.48 when the Zacks Consensus was calling for $0.55 for a 12.7% negative earnings surprise. Seems the New Years Resolutions aren’t being kept.

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Estimates for LTM have been declining of late. The Zacks Consensus Estimate for 2013 for LTM stood at $3.19 as of September 2012. The consensus has since dropped to $2.90 in January 2013 and now stands at $2.89. Similarly, estimates for 2014 have moved from $3.57 in September 2012 to their current level of $3.26.

Following the big drop in share price, the valuation for LTM has become more reasonable. The trailing twelve months P/E multiple of 16x is less than the industry average of 29x. The forward earnings multiple of 15x is much closer to the 22x industry average, but still trading at a discount. Price to book and price to sales multiples for LTM are pretty much in line with the industry averages.

The three- month chart below shows the stock doing the Wall Street equivalent of “pulling a muscle.” With the stock close to 52-week highs before the pre-announcement, a one day drop of 10 points put the stock much closer the its 52-week lows. Since that time, the stock has increased small amount, but the expectations for the future seem to get weaker and weaker.

Brian Bolan is a stock strategist for Zacks.com. He is the editor in charge of the Zacks Home Run Investor service, a buy and hold service where he recommends the stocks in the portfolio. Brian is also the editor of Follow The Money Trader a trading service that tracks institutional money flows and looks for great stock picks from that data.