Vail Resorts (MTN) became a Zacks #1 Rank Strong Buy on October 3 after the company’s Q4 FY2015 earnings beat on September 28.
Since then, shares have steadily climbed a mountain from $105 to all-time highs above $130 last week. It certainly helps that they delivered another earnings beat on December 7 for their Q1 FY2016 quarter.
But, the primary reason for the Zacks #1 Rank was the continuously rising EPS estimates from the analyst community over the past 30-90 days.
For the current fiscal year ending in July, the full-year EPS consensus rose over 15% from $3.33 to $3.85 in the past 90 days. And next year’s projections went from $4.18 to $4.45, representing 15.5% annual growth.
Early Snow + Park City = Lifting Revenues
November snowstorms in the West allowed Vail Resorts to open its Colorado, Utah and California ski resorts prior to schedule. The pre-Thanksgiving opening of these resorts is expected to boost Vail’s top line in the coming quarter as the company cashes in on the demand for skiing early in the season, especially for those eager to schedule holiday trips.
This includes the newly renovated Park City resort in Utah. Vail bought Park City in Sep 2014 and took over the Canyons resort the year earlier. Later, it joined both through a gondola to form the biggest ski resort in the U.S. Here’s how management proudly spoke of their newest achievement in a December 18 press release at the grand opening of the Quicksilver Gondola…
“Park City is one of the most spectacular places on Earth and now, for the first time ever, our guests will have unprecedented access to over 300 trails, 41 lifts and 7,300 acres of skiable terrain across one Park City,” said Bill Rock, chief operating officer of Park City. “Quicksilver, Miners Camp and the $50 million in capital improvements across the resort will completely transform the guest experience at Park City. We are thrilled to debut these projects in time for the Christmas holiday.”
Further, the company’s two biggest season passes — the Epic and the Epic Local — would give guests access to the both the resorts. This would bring in a large number of guests, which would in turn boost the company’s revenues in the crucial winter months. Vail has been able to raise ticket prices as they watch the volume of ticket sales increase.
Analysts Happy to Wait in this Lift Line
On December 8, Goldman Sachs upgraded Vail Resorts from Neutral to Buy with a price target of $144.
And the analysts at Janney Montgomery Scott took the opportunity to visit one of their favorite leisure companies this month, concluding that the $50 in capital improvements at Park City was an investment well spent. They rate shares a Buy with a fair value of $142 and here’s what they had to say…
“Given the FCF outlook and numerous opportunities for growth, we believe the stock is undervalued. We also think MTN is well positioned to benefit from several secular drivers within the ski industry, including the lack of new supply, which allows for pricing power.”
If you like the Rocky Mountains this time of year as much as I do, I recommend you consider the shares of MTN as well as a visit to Park City.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money (FTM) portfolio.
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