Do Amusement Park Accidents Impact the Market?

Stephanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

With news that a woman was killed on a roller coaster at Six Flags (NYSE: SIX) in Texas, consumers were forced to confront a very real truth: amusement park rides sometimes fail. While safety precautions are in place, an average of 4,423 children are injured each year on amusement park rides, according to a study in the journal Clinical Pediatrics.

Earnings to be reported

The accident happened just days before Six Flags was scheduled to announce its second-quarter earnings. Revenue is expected to be slightly down from the company's first-quarter, which came in at $87.5 million, a 32% increase over the previous year. This is likely due to the high bar the company set in previous earnings reports.

While the impact of the most recent accident will not be seen in an earnings report until later this year, investors need only look to 2007 and 2008, when the theme park owner suffered from two major tragedies as a teen was decapitated on the Batman ride in Georgia and a 13-year-old lost both legs on the Superman ride in Kentucky.

If there was ever a time that sales should be down, it was at the end of 2008. But the company saw an increase in revenue of $50.5 million, which was up 5% from 2007. Attendance for the year was up 2%, coming in at 25.3 million. Could this be proof that even with tragedies, families continue to line up to enjoy the rides?

Another accident

Six Flags isn't the only theme park concerning investors. Ohio's Cedar Point, which is traded under Cedar Fair Entertainment (NYSE: FUN), experienced its own incident on July 19, when a log ride rolled backward on an incline, injuring seven people.

Cedar Point, one of the oldest amusement parks in the U.S. and is one of the two most-visited amusement parks in the country. For Cedar Point, this is the third incident this summer, although the a previous accident was found to be unrelated to the ride itself. While the July 13th event that stopped the park's GateKeeper train was due to the health of the rider himself, on July 3rd, a Snake River Falls boat jumped the track due to low water levels on the ride. No one was injured during that incident.

In late June, Cedar Fair reported a great start to the summer season, wtih revenue up 5% and attendance up 1%. At the time, the company was on track to meet its guidance of more than $1 billion for the year. The company emphasized its dedication to providing a great experience for all of its customers. Soon after the call, the incidents began.

Comparisons to others

To see what impact this tough summer may have on Six Flags and Cedar Fair Entertainment, analysts could look to SeaWorld Entertainment (NYSE: SEAS). Although the company only went public in April, this looks like it will be a rough summer for the marine-based theme park. And that's because it's bracing for the release of a documentary based on a 2010 attack of a trainer by a whale. The film claims the animal was violent because captivity was not natural for him.

2010 was a tough year for SeaWorld, who was forced to lay off 350 workers following a year that saw revenue shrink from $1.4 billion to $1.2 billion. Analysts blamed the drop on the economy, competition from other attractions, and the negative publicity surrounding the death. However, one major difference between SeaWorld and the other two parks is that the treatment of the animal was under fire from animal activists.

Hope for these attractions?

As kids head back to school and the busy summer season comes to its conclusion, analysts likely expected attendance to slow down, anyway. By next spring, as Six Flags, Cedar Point, and SeaWorld gear up for a successful 2014, park-goers will likely have forgotten about the 2013 accidents, giving the parks a reason to have high hopes. Perhaps its time you take a look at these amusing businesses to see what the fuss is all about.

Solid companies selling at depressed prices have consistently helped generations of the world's most successful investors preserve capital, minimize risk, and achieve long-term, market-trampling returns. For one such company, read our free report: "The One REMARKABLE Stock to Own Now." Just click here to get started.

Stephanie Faris has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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!

blog comments powered by Disqus