Planet Fitness Inc. (PLNT Quick QuotePLNT - Free Report) has agreed to buy Sunshine Fitness Growth Holdings LLC, the first franchisee in its system, from a private equity firm TSG Consumer Partners. The transaction, which is expected to close during first-quarter 2022, is valued at $800 million in cash and stock.

Shares of this operator and franchiser of fitness centers gained 5.1% to close the trading session at $93.12 on Jan 12, 2022.

With respect to the transaction, Chris Rondeau, the chief executive officer of Planet Fitness, said, “We are excited to announce the acquisition of Sunshine Fitness, one of our best-performing franchisees in the system, with locations that will provide geographic diversity to our current corporate store portfolio and that are in markets with a long runway for future store development."

Key Takeaways

Sunshine Fitness — which operates 114 locations in Alabama, Florida, Georgia, North Carolina and South Carolina — is likely to add to Planet Fitness' adjusted net income per share in the low double-digit percent range in 2022.

Planet Fitness plans to fund the $425-million cash portion of the purchase price with cash on hand and proceeds from a new series of securitized notes.

It is to be noted that TSG acquired a majority stake in Planet Fitness in 2012. Planet Fitness started trading publicly in August 2015 and TSG withdrew its investment in Planet Fitness in May 2017. TSG then acquired a majority stake in Sunshine Fitness in December 2017.

The company stated that it would own about 10% of its store base or more than 200 corporate stores upon completion of the transaction.

Share Price Performance

Planet Fitness has been gaining strength from the reopening of stores, rise in membership sign-ups, strategic partnerships and international expansion. Focus on digitization initiatives also bodes well. Consequently, PLNT’s shares have gained 33.3% in the past six months against the industry’s decline of 4%.

Image Source: Zacks Investment Research

The Zacks Rank #3 (Hold) company raised its guidance for 2021. For 2021, the company expects revenues within $570-$580 million, up from the prior estimate of $530-$540 million. Adjusted EBITDA for 2021 is estimated in the $210-$220 million range, up from the prior expectation of $200-$210 million. Adjusted net income per share for 2021 is expected between 75 cents and 80 cents, up from the prior estimate of 65-70 cents.

Key Picks

Some better-ranked stocks in the Consumer Discretionary sector include Academy Sports and Outdoors, Inc. (ASO Quick QuoteASO - Free Report) , Red Rock Resorts, Inc. (RRR Quick QuoteRRR - Free Report) , and Rush Street Interactive, Inc. (RSI Quick QuoteRSI - Free Report) .

Academy Sports currently carries a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 68.9%, on average. Shares of ASO have gained 2.4% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Academy Sports’ earnings per share for the current financial year has increased to $6.16 from $5.56 over the past 30 days.

Red Rock presently flaunts a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 178.5%, on average. Shares of RRR have gained 19.5% in the past six months.

The Zacks Consensus Estimate for Red Rock’s earnings per share for the current financial year suggests growth of 63.1% from the year-ago period.

Rush Street also carries a Zacks Rank #2 at present. The company has a trailing four-quarter earnings surprise of 50.4%, on average. Shares of RSI have gained 24.5% in the past six months.

The Zacks Consensus Estimate for Rush Street’s sales for the current financial year suggests growth of 23.9% from the year-ago period.