Merrill Lynch downgraded Bally Total Fitness (BFT) to neutral from buy.
Analyst Burke Koonce says he downgraded as the shaky economy and competitive pricing in the fitness center marketplace continues to weigh on the company's financial results. He notes the fourth quarter earnings per share were below estimates. While the quarter was soft, Koonce says it was not entirely unanticipated. However, 2003 is off to a weak start in terms of new membership signups, and he doesn't see a catalyst that could improve business fundamentals in the near term.
He cut the $2.00 2003 earnings per share estimate to $1.62. While he believes significant upside exists in shares, near-term volatility lies ahead given the challenging operating environment.