Did the Tide Just Turn in SeaWorld's Favor? By Steve Symington | More Articles | Save For Later 
September 12, 2013 | Comments (0)
Things are looking up for SeaWorld (NYSE: SEAS ) , with shares having risen around 6% today after the theme-park operator told investors it was on pace for a "record year" when all is said and done in 2013.
To be sure, investors could certainly use the optimism, considering that SeaWorld stock has fallen around 9% since its first-day 24% IPO pop last April, lagging the S&P's respectable 9.6% gain during the same period.
SEAS Total Return Price data by YCharts
In SeaWorld's press release today, the company elaborated by saying, "Despite challenging weather conditions at the start of the summer, preliminary year to date total revenue and admissions revenue through August 2013 increased by approximately 3% and 4%, respectively" from the same year-ago period.
In particular, the company says that its flagship SeaWorld Orlando and San Diego parks enjoyed the strongest gains, so it reiterated its previous adjusted EBITDA guidance of $430 million, to $440 million, for 2013.
For those of you keeping track, this marks an improvement over SeaWorld's first-half revenue gain of 2%, which the company achieved by raising ticket prices to offset a 6% decline in attendance compared to the same period last year. That 2% revenue gain, in turn, translated to adjusted EBITDA of $138.1 million in the first half of 2013. However, SeaWorld still reported a first-half net loss of $0.66 per share during the period, or nearly 10 times the previous year's first-half loss of $0.07 per share.
Here's why I'm still worried
Curiously enough, however, SeaWorld's press release also made no mention of attendance numbers, which begs the question of whether the company is simply cherry picking facts to boost investor sentiment. After all, if attendance is still falling, SeaWorld can only raise prices to offset those declines so many times before consumers revolt and choose other comparable options from the likes of competitors in Six Flags (NYSE: SIX ) , Disney (NYSE: DIS ) , or Cedar Fair (NYSE: FUN ) .
And park attendees wouldn't be the only ones with better options, either. Remember, shares of Cedar Fair have risen more 31% so far in 2013, despite the company's so-so quarterly results last month, which included meager revenue growth of just 1%. Still, Cedar Fair's earnings of $0.85 per share beat analyst estimates, and the company also maintained its dividend, which currently yields a healthy 5.7%. That payout should easily tide investors over until consumer spending picks up further.
Meanwhile, though Six Flags reported similar year-over-year revenue growth of just 2% last quarter, the company is also already profitable on a GAAP basis, while shares are currently trading at just 9.5 times last year's earnings. You can't blame the folks at Six Flags, then, for repurchasing $404 million in stock during the first six months of 2013, all while maintaining its own dividend, which currently yields 5.3%.
Finally, Disney stock is up 28% so far this year, helped by last month's quarterly report, with which the entertainment industry stalwart told investors its Parks and Resorts segment revenue increased 7%, translating to operating income growth of 9%. This result was due not only to strong park attendance in spite of Disney's own price increases last quarter, but also to the fact that guests were willing to spend more money than ever once they were actually in Disney's world-renowned attractions.
Foolish takeaway
In the end, given SeaWorld's current lack of growth, lack of GAAP profitability, and tremendous $1.67 billion debt load with just under $94 million in cash, I'm still not convinced the company's "record year" is anything to cheer about just yet.
For now, at least, I think there are much better places to put your hard-earned investing dollars to work. |
