SeaWorld Entertainment, Inc.’s (SEAS) third quarter earnings missed the Zacks Consensus Estimate while revenues beat the same by a slight margin. This was the third consecutive quarterly earnings miss by the company.
We note that the third quarter being the summer quarter is the most important for this leading theme park and entertainment company. Share price of the company plunged 9.4% in response. Meanwhile, the company re-affirmed its guidance for 2014.
SeaWorld’s adjusted earnings of $1.01 missed the Zacks Consensus Estimate of $1.13 per share by 10.6% and declined 24.6% year over year owing to a decline in revenues and an increase in total costs and expenses.
Total revenue of $495.8 million beat the Zacks Consensus Estimate of $494.0 million marginally. Promotional offerings could not attract customers and traffic continued to decline resulting in an 8% year- over-year decline in revenue.
Behind the Headline Numbers
Total revenue per capita declined 2.9% to $58.99 while admission per capita declined 5% to $36.47 owing to an unfavorable change in attendance mix.
Attendance declined 5.6% to 8.4 million in the quarter owing to the negative publicity surrounding the release of Blackfish, a documentary aired by CNN in 2013. The documentary focused on issues pertaining to the treatment of whales in captivity. It also highlighted the death of a trainer at one of the company’s parks. Also, a challenging and competitive industry and delay in the scheduled opening of one of the company’s new rides at the Busch Gardens Tampa park led to the decline.
Adjusted EBITDA declined 18% year over year to $209.1 million, owing to a decline in revenues and an increase in costs and expenses. In-park per capita spending increased slightly to $22.53.
2014 Guidance Maintained
The company expects revenue and adjusted EBITDA to decline in the range of 6% to 7% and 14% to 16% year over year, respectively in 2014.
The company expects annual costs savings of $50.0 million by the end of 2015 as a result of its cost savings plan. However, it expects to incur a restructuring charge of up to $13 million in the fourth quarter of 2014 related to its cost reduction initiatives.
Our Take
Of late, challenging industry conditions have been a headwind. Decline in total revenue per capita due to an increase in promotional offerings and lower attendance has been impacting results of the company since the beginning of 2013. A weak consumer spending environment due to higher gas prices, delayed income tax refunds and higher payroll taxes have also compelled Americans to defer their luxury expenses, thereby dampening the results of the company. SeaWorld presently has a Zacks Rank #5 (Strong Sell).
Other Stocks to Consider
Some better-ranked stocks worth considering in the leisure industry include Diamond Resorts International, Inc. (DRII), Interval Leisure Group, Inc. (IILG) and Manchester United plc (MANU). While Diamond Resorts and Interval Leisure sport a Zacks Rank #1 (Strong Buy), Manchester United carries a Zacks Rank #2 (Buy).
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