Life Time Fitness, Health Sacrificed With Weak Consumer (LTM)

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If you thought that health and fitness was a secular trend, you wouldn’t know it if you looked at Life Time Fitness Inc. (NYSE: LTM).  The health club operator found itself in a precarious spot Friday.

Life Time’s earnings weren’t a problem, but the guidance is.  Its earnings were in-line at $0.48 EPS as expected and $171.1 million in revenues versus $171.9 million.  The company gave forecasts of $2.05 to $2.08 EPS on revenue of $780 to $800 million for 2008, while First Call had estimates at $2.18 EPS on $806.8 million in revenues.

Shares fell as hard as a 10 pound plate falling off a dumbbell.  It saw a 17% drop to $33.50 Friday, and its intraday low of $30.40 marked a new 52-week low.  This is roughly a 50% haircut from the $65.09 high over the last year.  Now its forward multiple is in-line with the overall market, and its valuation looks OK.  If the growth beyond 2008 slows too much then this will have to be more of a simple earnings play, but all in all this looks fine on the surface for value and GARP investors alike.  We’ll see later on this year if the look on the surface is right or if anything is lurking underneath.

It looks like as the US is slowing and as customers are reviewing their bills, gym memberships at around $1,000 or more per year may get cut some too.  It costs money to stay in good shape.

Jon C. Ogg
February 23, 2008