Theme Parks Are Good for Investments and Memories
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School is out and summer is finally upon us. Let the fun in the sun begin!
A TripAdvisor survey reveals that this year will see the return of the summer vacation. Over 86% of respondents indicated that they intend to go on a leisure trip this summer.
As theme parks drain the savings accounts of willful and happy travelers, is there a theme park stock that might return a few of those dollars to your investment accounts?
The baby killer whale
Still just a baby killer whale on the New York Stock Exchange, SeaWorld Entertainment (NYSE: SEAS) only went public in April 2013, and shortly thereafter reported its first quarter earnings.
The company reported a loss of $40.4 million during the first quarter, or $0.49 per share. This may not sound favorable at first, but it is actually an improvement over the $45.1 million loss during the same quarter in 2012. The company saw also revenue increase 12% to $238.6 million during the quarter.
Admission per capita (defined as admission revenue divided by total attendance) increased by 12% from $38.99 to $43.56 primarily as a result of pricing and yield management strategies. In-park per capita spending (defined as food, merchandise, and other revenue divided by total attendance) increased by 6% from $23.17 to $24.63 due to improved economic conditions, targeted price increases, and increased offerings. Attendance in the first quarter of 2013 was up 2% to 3.5 million, a benefit of the timing of Easter and New Year's Eve both falling in the same fiscal quarter. SeaWorld is also the parent company of Busch Gardens Tampa.
Two adults and two children under the age of nine can visit SeaWorld for a single day for a total of $332.28 (with tickets purchased online in advance).*
The magic of the Magic Kingdom
The Walt Disney Company (NYSE: DIS) overall reported a 32% increase in net income from the previous year for the most recent fiscal quarter. The theme parks and resorts segment enjoyed the largest growth, with profits rising 73% to $383 million. The company attributed the increase to longer guest stays at resorts, and the new Disney Fantasy cruise ship. A hike in food and beverage prices, as well as theme park entrance tickets, added a 14% increase to the unit’s revenue of $3.3 billion.
The New Year’s Eve and Easter holiday anomaly helped the company as well--an anomaly that should not be overlooked, given how beneficial it was.
Disney tripled its investment in its resorts business over the past few years, spending $9.2 billion to update and refresh some of its parks in both Florida and California. Attendance at the U.S. parks increased 8% in the second quarter.
The cost for two adults and two children (under the age of nine) to attend just the Magic Kingdom for one day? $391.94.*
Comcast (NASDAQ: CMCSA) is the parent company of NBC Universal, which operates the Universal Studios theme parks.
The Universal theme parks also saw a nice bump up from the New Year’s and Easter calendar anomaly. For the first quarter of 2013, revenue from the Comcast/NBC Universal Theme Parks segment increased 12.2% to $462 million compared to $412 million in the first quarter of 2012. It’s a nice improvement, but barely a drop in the bucket compared to the 73% increase at Disney.
Attendance at Universal’s Islands of Adventure in Orlando increased 66% between 2009 and 2011, thanks to the opening of the new Wizarding World of Harry Potter.
$323.96 will get two adults and two individuals under 48 inches tall into Universal Studios for one day.* So far that's the cheapest admission among the theme parks.
Earnings that make a berry farm look good
Cedar Fair (NYSE: FUN) owns 11 amusement parks, four outdoor water parks, one indoor water park and five hotels. The company includes Kings Dominion, Worlds of Fun, Knott’s Berry Farm, Great America, King’s Island, and Cedar Point.
Cedar Fair reported improved revenue for the first quarter of $41.8 million. GAAP reported sales were 48% higher than the prior-year quarter's $28.2 million.
Historically, first quarter results represent less than 5% of the company's full-year revenues as the vast majority of its world-renowned parks and facilities are closed during this quarter. As a result, the company typically operates at a loss during this period.
The increase was primarily due to the strong attendance and in-park guest per capita spending at Knott's Berry Farm, the company's only year-round property. The improved results at Knott's Berry Farm are attributable to recent investments the park has made over the past year to revitalize the park and enhance the overall guest experience. The company also said that the calendar anomaly helped boost returns as well.
A trip to Knott’s Berry Farm for four individuals, plus one car, for one day will set you back a total of $192.95.
Six Flags (NYSE: SIX) went public in 1996, and if the joke weren’t so obvious to make, you might think that the firm's earnings coined the inevitable rollercoaster jokes. When the economy went south, so did Six Flags. The company filed Chapter 11 bankruptcy in 2009, restructured, and came back to the Street in 2010, where it now sees significant quarterly growth.
Similar to Cedar Fair, most of the amusement parks operated by Six Flags are not “distance destinations.” They are within a few hours of driving of most customers, and are just a day trip experience, and not a large scale family vacation. In theory, this means that when a family cannot afford to go all the way to Disney or Universal on vacation, they can settle for a closer to home option. Because of this, the company is not as heavily impacted by a sour economy as other parks may be.
For its most recent quarter, the company reported $87.5 million in revenue, an increase of 31.8% compared to same quarter the previous year. The stock is up more than 27% year-to-date and boasts a dividend yield of 4.8%.
Attendance in the first quarter increased 525,000 or 41% to 1.8 million guests. Approximately half of the 525,000 attendance gain resulted from the benefits of the odd calendar year mentioned before.
Two adults, two individuals shorter than 48”, and one vehicle can visit Six Flags Magic Mountain for a mere $195.95.*
Along for the ride
If you are looking to invest your money in a long-term stock, you can't go wrong with any of these companies. The most proven, well-diversified, and long-term stable stock is definitely Disney. SeaWorld is still a little wet behind the ears, but shows great promise (buy low, right?). If you are looking for the right theme park to invest your money in for a lifetime of memories with your children, you'd better consult with your children first.
*Does not include food, drinks, souvenirs, or anything a child may suddenly believe is the one and only object that will make him or her happy for the rest of his/her existence - or until the next souvenir shop.
It's easy to forget that Walt Disney is more than just the House of Mouse. True, Disney amusement parks around the world hosted more than 121 million guests in 2011. But from its vast catalog of characters to its monster collection of media networks, much of Disney’s allure for investors lies in its diversity, and The Motley Fool's premium research report lays out the case for investing in Disney today. This report includes the key items investors must watch as well as the opportunities and threats the company faces going forward. So don't miss out -- simply click here now to claim your copy today.
Erin McBride has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!