SeaWorld Entertainment, Inc. SEAS is set to report first-quarter 2015 results on Mar 7, before the market opens. Last quarter, it posted a negative earnings surprise of 50.00%. Let’s see how things are shaping up for this announcement.
Factors to Consider
This leading theme park and entertainment company’s earnings missed the Zacks Consensus Estimate in all the quarters of 2014. While revenues missed the consensus mark for the first two quarters, it managed to beat the same in the final two.
A decline in total revenue per capita due to an increase in promotional offerings and lower attendance has been affecting results. Moreover, the promotional offerings have not been able to boost declining traffic trends. The negative publicity associated with the treatment of captive whales and the prolonged scrutiny of its employee safety practices, since an animal trainer was killed in 2010 by an orca whale at its Orlando Park, is expected to continue to adversely impact first-quarter results.
Of late, challenging industry conditions have been a headwind. Despite moderate improvement in economic growth, consumers are increasing their spending only modestly as an increase in jobs this year is yet to translate into significantly higher wages. High interest rates, increased health care costs and still-tightened credit availability continue to hurt consumer discretionary spending in the U.S. As a result, Americans are unwilling to spend much on leisure activities, which is pulling down the company’s revenues.
However, management has been proactively trying to turn SeaWorld Entertainment's fortunes around through a restructuring program, including headcount reductions and a media campaign focusing on its community outreach activities, which offers some hope for better sales and profit growth in the future.
Earnings Whispers
Our proven model does not conclusively show that SeaWorld Entertainment is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The company’s Earnings ESP stands at -1.72%. This is because the Most Accurate estimate is pegged at 59 cents while the Zacks Consensus Estimate stands higher at 58 cents.
Zacks Rank: SeaWorld Entertainment has a Zacks Rank #3 (Hold). While SeaWorld’s increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some other companies in the leisure and recreational services and consumer discretionary sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
AMC Entertainment Holdings, Inc. AMC, with an Earnings ESP of +2.22% and a Zacks Rank #3.
Carmike Cinemas Inc. CKEC, with an Earnings ESP of +4.26% and a Zacks Rank #3.
The Madison Square Garden Company MSG, with an Earnings ESP of +18.75% and a Zacks Rank #3.
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