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Cedar
Fair
Entertainment (FUN)
In a world of
economic
uncertainly, political unrest and elevated stress levels, consumers
need a
break. In times of strain we have found
that they might turn to alcohol or tobacco.
But based on results from Cedar Fair Entertainment, Americans might be
looking
to amusement parks and good ole’ fun times to either relieve pressure
or maybe
just enjoy the better quality of life and confidence they are feeling.
With the exception of
California, winter is not usually the best time for outdoor amusement
parks. But even in the thick of cold season, Cedar Fair’s
park Cedar Point saw record attendance in 2011 that raised per-customer
spending and out-of-park revenues 5.2 percent to $1.028 billion for
2011,
generating a profit of $72.2 million.
Cedar Fair seems to
be doing
something right in an industry that might be seeing a turnaround. Its
competitor Six Flags also reported record earnings in 2011.
Could 2012 be the year of the fun-park?
Company
Description
Cedar Fair is a publicly traded partnership that operates regional
amusement
parks in North America. They are one of
the largest in the world with eleven amusement parks, six water parks,
four
hotels and a marina on the Great Lakes.
Their parks are located in Ohio, California, North Carolina, Virginia /
District of Columbia, Pennsylvania, Minnesota, Missouri, Michigan, and
Toronto,
Ontario giving them diverse geographic exposure. In
1997 they bought Knotts Berry Farm in California.
Looking
at some of the other theme amusement parks like Universal, Disney and
Six
Flags, there seems to be a trend occurring.
Even though the fourth quarter is generally the weakest for parks due
to
weather and stay-at-home holidays, the industry is seeing strength:
According to Comcast
Corp, NBCUniversal
theme park revs rose 4 percent during the final three months of 2011,
propelled
by higher per-guest spending at Universal Orlando and Universal Studios
Hollywood.
Six Flags reported a
loss, but noted
that “overall guest attendance increased 16 percent to 3.6 million
guests
during the quarter, helping boost revenue.”
Bob Iger of Disney
had this to say about
traffic at the Disney Parks “Turning to Parks and Resorts. I’m very
pleased
with recent attendance and pricing trends. Disneyland Resort has seen
strong
results lately due in part to the strategic investment we made at
Disney’s
California Adventure.”
Trends
look to be improving for the industry and if Cedar can control costs
and
continue to execute their pricing, advertizing and ecommerce strategy
successfully, this stock could see more growth in 2012.
Financial Profile
Cedar Fair is a small-cap ($1.59 billion) company that is trading at
about 12.75
times forward (expectations for next quarter) earnings. This
low valuation should help support Cedar’s
stock price moving forward.
FUN
became a Zacks Rank #1 Strong Buy on February 21st.
The amusement company as a whole
reported a $72.2 million
profit in FY2011, which equated to $1.29 a share. That was quite a jump
from
FY2010 when FUN posted a loss of $31.6 million, or 57 cents a share in
2010.
Cedar
Fair reported Q4 revenues of $144.8 million and a loss of just 1 cent
per
share. Typically, the fourth quarter is the weakest for Cedar Fair,
with losses
usually in the millions. In the same period a year ago, the company had
a $63.2
million loss, or $1.14 a share. They have
the highest margins in the industry and stable diverse cash flows even
in
recessionary times.
Cedar
Fair attributed the strong Q4 earnings to their Halloween Haunt events
at its
various parks.
Earnings
Estimates
Cedar posted much higher than expected earnings last quarter.
They noted
that there hasn’t been a successful new park built in the US in the
past 30
years, so the barriers to entry are low for competition which helps
support
their positive outlook. So much so, they
are investing $90 million into their existing parks to improve
consumers
experience and keep them coming back for more.
Expectations
are for FUN to lose 70 cents this quarter, but to generate 20 cents in
profits
next quarter and earn $2.26 per share this year (FY2012). Of
the 4
analysts who cover FUN, the consensus is for the company to grow
earnings by 75%
in the current year (FY2012) and roughly 23% in FY2013.
In terms of the magnitude of
analyst estimate trends, we are seeing short term (current and next
quarter) and
longer term (FY2012 and 2013) consensus estimates the same or higher
than they
were 90 days ago.
Cedar beat analysts’
expectations last quarter for the first time in a year. They
have averaged a 7% earnings miss over
the past year.
Market
Performance & Technicals
For a stock that has missed expectations, Cedar has had some serious
momentum
over the past year as it more than doubled in value and momentum has
picked up
in the past month or so with a 33% rally from levels in early January.
Cedar
Fair tends to be closely correlated and just about as volatile when
compared to
the broad market, with a Beta of 1.12.
FUN
has maintained bullish strength above its 200-day moving average for
the
majority of the past year. FUN is now
firmly above its 50- and 200-day moving averages of $24.37 and $21.05,
respectively. It continues to rally even as markets are
moving more
sideways.
FUN
has exceeded the S&P 500’s performance by over 41% in the past
year and almost
11% just in the past 3 months. With the recent run-up into
their report
and beyond, they managed to return 12.5% more than the broad market
over the
past four weeks. With consumers apparently feeling a little
better about
their finances, FUN could see a nice jump in revenue for their peak
seasons the
spring, summer and fall.
Jared
A Levy is the
Momentum Stock Strategist for Zacks.com. He is also the Editor in
charge of the
market-beating Zacks Whisper Trader Service.
CEDAR FAIR (FUN): Free Stock Analysis Report
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