Cedar Fair climbed back up to Zacks rank #1 (Strong Buy) after excellent quarterly results and updated management guidance.
About the Company
Cedar Fair L.P. (FUN) is a publicly traded partnership, headquartered in Sandusky, Ohio. It is one of the largest regional amusement-resort operators in the world. FUN owns and operates 11 amusement parks, four outdoor water parks, one indoor water park and five hotels.
The company’s flagship park at Cedar point has been consistently voted the “Best Amusement Park in the World” in an annual poll conducted by Amusement Today newspaper.
Excellent Second Quarter Results
FUN reported its second quarter results on August 8, 2013. Net revenues increased 1%, to $361.6 million from $357.6 million in prior-year quarter. This increase reflects a 5% increase in average in-park guest per capita spending, and a 5%, increase in out-of-park revenues, partially offset by a 4% decrease in visits.
According to the company, the decrease in visits was the direct result of fewer operating days, the Easter holiday shift to the first quarter and unfavorable short-term weather trends.
The cash flow and liquidity position remained strong and the company had $43.6 million in cash on hand at the end of the quarter. FUN also announced a cash distribution of $0.625 per LP unit, consistent with its targeted annualized rate of $2.50 per LP unit for 2013.
Management Raises Guidance
On September 3, 2013, the management reported that the company continued its strong performance through the labor day weekend and raised its 2013 guidance. The management now expects full-year net revenues between $1.100 billion and $1.125 billion and adjusted EBITDA between $415 million and $425 million, up from the previous guidance of net revenues between $1.090 billion and $1.115 billion, and adjusted EBITDA between $400 million and $410 million.
Estimates Revisions
As a result of strong quarterly report and updated guidance, analysts have raised their estimates for FUN. Zacks consensus estimate for the current quarter now stands at $2.84 per share up from $2.78 per share, 60 days ago.
Rising estimates sent FUN back to a Zacks Rank#1 (Strong Buy) on October 8, 2013.
Attractive Distribution
FUN is structured as a Master Limited Partnership (MLP), and thus investors receive distributions instead of dividends. At the current price, the annual $2.50 distribution amounts to a very attractive yield of 5.7%. Considering, its significant free cash flow generation and strong balance sheet, we believe that the company can continue to grow its distributions going forward.
The Bottom Line
FUN’s impressive top-line growth is expected to get further boost from continued innovations, expansion and several strategic initiatives put in place last year. Successful development and expansion of the e-commerce platform and installment payment program are also instrumental in driving growth.
The management believes that they are on track for their fourth consecutive year of record results.
FUN is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of “Outperform”. In addition to a very attractive yield, the stock seems to have a significant upside potential.
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