Life Time Fitness Inc. shares plunged to their lowest point in more than a year Friday, after the health club operator issued weak preliminary results for 2012.
THE SPARK: The company said after the market closed Thursday that it expects to report 53 to 56 cents per share for the final three months of 2012, on revenue between $273 million and $275 million. This includes a 7 cents-per-share hit for losses tied to Superstorm Sandy and other special items.
Analysts polled by FactSet were expecting the company to earn 58 cents per share on revenue of $275 million.
Life Time anticipates earnings between $2.63 and $2.66 per share for the full year 2012, on revenue of roughly $1.13 billion. That is down from its prior forecast for earnings of $2.73 to $2.76 on revenue of $1.13 billion to $1.14 billion.
Analysts, on average, were expecting earnings of $2.69 per share on revenue of $1.13 billion.
For 2013, Life Time Fitness forecast earnings between $2.85 and $2.95 per share, on revenue of $1.20 billion to $1.22 billion.
Wall Street was expecting earnings of $2.98 per share on revenue of $1.21 billion.
THE BIG PICTURE: The company operates 105 health clubs in North America under the Life Time Fitness and Life Time Athletic brands.
Life Time Fitness struggled during the fourth quarter with costs tied to Sandy, self-insured expenses, added technology costs and expenses tied to the launch of Commitment Day, an effort that begins Jan. 1 and continues through the year urge people to commit to healthy living. The company's membership growth also slowed more than expected during the quarter, coupled with higher membership acquisition costs.
The company will report its full financial results for the quarter and commentary on its future on Feb. 21.
THE ANALYSIS: Stifel Nicolaus analyst Steven Wieczynski said that management has indicated that 2013 would be a "transition year" and some investors with a long-term focus may choose to hold on to its stock. Wieczynski said he understands the company's philosophy of trying to grow the business with certain initiatives that will drive expenses up in the near-term, but won't necessary have a revenue benefit for some time. But he believes investors with a shorter-term focus might not feel the same way.
The analyst said he is concerned about lower membership counts but encouraged by higher monthly dues, which he thinks will dictate the success of the company in the long run. Wieczynski maintained a "Hold" rating on Life Time shares.
SHARE ACTION: Shares dropped $10.62, more than 20 percent, to $40.07 by midday, after earlier hitting $39.65, their lowest point since December 2011. The stock traded as high as $52.68 in March.