What you need to know before next week’s release

Planet Fitness (PLNT) is expected to post a year-over-year increase in earnings due to higher revenue when it reports results for the quarter ending June 2022. This widely known consensus outlook gives a good idea of ​​the company’s earnings outlook, But how actual results compare to these estimates is a powerful factor that could affect its stock price in the short term.

The stock could rise if these key numbers beat expectations in the next earnings report, which is expected to be released on August 9. On the other hand, if they don’t, the stock may move lower.

While management’s discussion of business conditions on the earnings call will primarily determine the sustainability of the immediate price change and future earnings expectations, it pays to take a negative view of the odds of a positive EPS surprise.

Zacks Consensus Estimate

This gym operator is expected to post quarterly earnings of $0.37 per share in its next report, representing a +76.2% year over year change.

Revenue is expected to be $229.9 million, 67.5% higher than the same quarter last year.

Estimate Revision Trend

The consensus EPS estimate for the quarter has been unchanged for the past 30 days. This is essentially a reflection of how hedge analysts have collectively reassessed their initial estimates during this period.

Investors should note that an aggregate change may not always reflect the direction of forecast revisions by individual hedging analysts.

profit whisper

Revisions to estimates prior to a company’s earnings release provide clues about business conditions for the period for which results are to be released. Our proprietary surprise prediction model, the Zacks Earnings ESP (Expected Surprise Prediction), has this idea at its core.

The Zacks Earnings ESP compares the most accurate estimate to the Zacks Consensus Estimate for the quarter; the most accurate estimate is a more recent version of the Zacks consensus estimate of EPS. The idea here is that analysts who revise their estimates just before an earnings release have the most recent information, which could potentially be more accurate than they and other contributors to the consensus had previously predicted.

Therefore, a positive or negative ESP earnings reading theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is significant only for positive ESP readings.

A positive earnings ESP is a strong predictor of earnings, particularly when combined with a Zacks #1 (Strong Buy), 2 (Buy), or 3 (Hold) rank. Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a strong Zacks Rank actually increases the predictive power of Earnings ESP.

Note that a negative ESP gain reading is not indicative of a lack of gain. Our research shows that it is difficult to predict an increase in earnings with any degree of confidence for stocks with negative earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell).

How have the numbers evolved for Planet Fitness?

For Planet Fitness, the most accurate estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently turned bearish on the company’s earnings outlook. This has resulted in a profit ESP of -5.66%.

On the other hand, the stock currently has a Zacks rank of #3.

Therefore, this combination makes it difficult to conclusively predict that Planet Fitness will beat the consensus EPS estimate.

Does the history of earnings surprises hold any clues?

Analysts often consider the extent to which a company has been able to match consensus estimates in the past when calculating their estimates for future earnings. So it’s worth taking a look at the history of surprises to gauge their influence on the next issue.

For the last reported quarter, Planet Fitness was expected to post earnings of $0.27 per share when it actually produced earnings of $0.32, delivering a +18.52% surprise.

In the past four quarters, the company has beaten consensus EPS estimates twice.

Bottom line

An earnings gain or loss may not be the only basis for a stock to go up or down. Many stocks end up losing ground despite rising earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts help a series of stocks gain despite lost earnings.

That said, betting on stocks that are expected to outperform earnings expectations increases the odds of success. This is why it is worth checking a company’s Earnings ESP and Zacks Rank before its quarterly release. Be sure to use our earnings ESP filter to discover the best stocks to buy or sell before they are reported.

Planet Fitness doesn’t seem like a compelling candidate to beat the profits. However, investors should also pay attention to other factors to bet on this stock or stay away from it before its earnings release.

Expected results of an industry player

Cinemark Holdings (CNK), another stock in the Zacks entertainment and leisure services industry, is expected to report earnings per share of $0.14 for the quarter ending June 2022. This estimate points to a year-over-year change of +111.8%. Revenue for the quarter is expected to be $728.73 million, up 147.3% from the prior year quarter.

The EPS Consensus Estimate for Cinemark was revised down 153.3% over the last 30 days to the current level. However, a lower more accurate estimate resulted in a profit ESP of -34.27%.

This earnings ESP, combined with its Zacks Rank #4 (Sell), makes it difficult to conclusively predict that Cinemark will beat the consensus EPS estimate. In the past four quarters, the company twice beat consensus EPS estimates.

Stay on top of upcoming earnings announcements with the Zacks earnings calendar.

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