Town Sports International surges on strong earnings, buyback
NEW YORK—Town Sports International Holdings Inc. shares surged Friday after the fitness center chain reported strong earnings in the latest quarter and announced a $25 million stock buyback plan.
Late Thursday, the New York-based company said it earned 18 cents per share in the latest quarter, 3 cents ahead of the average analyst estimate.
Revenue rose 9 percent year over year, and same-club revenue improved 4.5 percent. Same-club revenue, or revenue from clubs open at least a year, is considered a key measure of chain performance because it shows growth at older locations rather than newly opened ones. The company operated 162 clubs at the end of March.
Town Sports also backed its 2008 profit and revenue forecasts of 80 to 84 cents per share on $510 million to $520 million in revenue.
Thomas Shaw of Stifel Nicolaus & Co. believes the guidance could prove too low.
"Conservative guidance assumes worsening trends despite current membership stability and strength," he wrote in a note. Shaw expects Town Sports to earn 84 cents per share this year. He maintained a "Buy" rating.
Edward Aaron of RBC Capital Markets, who rates the stock "Sector Perform," raised his profit estimates to bring them in line with the company's guidance.
"Membership metrics remained surprisingly stable given the tough consumer economic environment, especially in the New York City area," the analyst wrote in a note. "Costs were well controlled and lower than expected."
Piper Jaffray analyst Anthony Gikas raised his price target on the stock to $12 from $10 and said the company's new management is off to a good start. The company has appointed a chief executive, chief financial officer and chief operating officer within the past seven months.
Shares of Town Sports International jumped $1.95, or 26.2 percent, to close at $9.38. The stock has traded in between $6.10 and $23.36 over the past 52 weeks.
