Stocks Gaining from the European Debt Crisis
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With the European debt crisis has come full media coverage of civil unrest in the streets of Athens and other tourist attractions during the peak summer vacation period. This and anemic economic growth in the United States has more Americans staying at home for entertainment, and more coming here for their vacation. As a result, companies that cater to the entertainment dollar spent within the United States have gained.
Cedar Fair (NYSE: FUN) and Six Flags Entertainment Corporation (NYSE: SIX) operate amusement parks in the United States. Based in Texas, Six Flags is up more than 33% for 2012. Year to date, Cedar Fair, headquartered in Ohio, has risen more than 54%. Six Flags is doing better as a result of addition through subtraction as it shed itself of facilities in Belgium, Netherlands, Germany, Spain and France. For its remaining 19 parks, Six Flags has maintained its ticket levels to appeal to budget conscious consumers while others have raised the prices. As a result, on a quarterly basis, sales growth is higher by 8.19% and earnings-per-share growth has increased by 21.02%.
W at a seven-year high, the Chief Executive Officer, Matt Ouimet, stated in a recent interview that Cedar Fair still "has a lot more upside." With more vacationing in the United States, Cedar Fair has increased sales of season passes and other premium packages. Quarterly sales growth is up by 4.95% for Cedar Fair with earnings-per-share rising by more than 23% for the same period.
Winnebago (NYSE: WGO) sells to the ultimate "stay at home crowd" as its customers drive around in their dwelling. Lower gas prices and higher air fares also make a motor home more appealing. Since January 1, Winnebago has surged by 43.90%. The most recent analyst action was an upgrade to "Buy" from "Hold" in late June. "Buy" is what more have been doing with Winnebago's recreational vehicles as quarterly sales growth is up by 14.86%. On the same time measure, earnings-per-share growth has soared by 228.57%. While that rate is obviously unsustainable, the projected earnings-per-share growth for Winnebago over the next year is a robust 70%.
Flying its bargain hunting passengers to destinations primarily in the United States on an ultra-discount basis is Spirit Airlines (NASDAQ: SAVE). Due to its low cost business model and a wide array of fee charges, Spirit Airlines has a profit margin of 8.07%. By comparision, JetBlue, another low cost carrier, has a profit margin of just 2.41%. Discount carrier Southwest Airlines, the only airline to remain profitable every year since deregulation, has a profit margin of only 1.64%.
This is a model that appeals to air travelers in lean economic times. On a quarterly basis, sales growth is up for Spirit Airlines by 29.58%. For the same time segment, earnings-per-share growth is higher by 194.33%. Growth is expected to continue for the next year at a 29.08% rate. This also obviously appeals to investors as the stock price for Spirit Airlines has soared more than 30% for 2012.
"Vegas, baby, Vegas" has obviously been the destination for the tickets purchased from Spirit Airlines or the one punched more into the navigational units of Winnebagoes and other motor vehicles as the volume of visitors to Las Vegas has increased by 2.4% from last year. MGM (NYSE: MGM), a hotel and resort company, has enjoyed quarterly sales growth of 51.21% due to increased tourism in "...Las Vegas, which MGM is more a beneficiary of than many peers, is recovering with improved room rates and convention volumes." A turnaround story, there is still much more "recovering" for MGM to do, but Cantor Fitzgerald just initiated coverage on June 10 with a "Buy" rating and a target price of $14, up from about $9.80 presently.
Spending by international visitors to the US has increased by 12% from last year, leading to a record setting pace for travel and tourism for 2012. This has also happened with the US Dollar being stronger against foreign currencies than last summer. The Euro has conversely fallen. Even with exchange rates making it more expensive to come to the United States and cheaper to visit Europe, travel and tourism is booming for America at a record pace.
Companies that benefit from the foreign and domestic entertainment dollar have done very well in 2012 due to the problems in Europe and the enduring appeal of the United States as a destination. This should endure well into the future. Economic growth should continue to be tepid in the United States for quite some time and the debt crisis in Europe is not going away. There will be no summer Olympic Games next year, so American sites will not have as much competition. From this, Cedar Fair, Six Flags Entertainment Corporation, Spirit Airlines and MGM will benefit.
jonathanyates13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Winnebago Industries. 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.If you have questions about this post or the Fool’s blog network, click here for information.
