On Mar 17, Zacks Investment Research upgraded Vail Resorts Inc. MTN to a Zacks Rank #1 (Strong Buy). The mountain resorts and urban ski areas operator has been witnessing an upward trend in earnings estimates ever since it reported strong fiscal second-quarter 2015 results on Mar 12, 2015. Further, shares of Vail Resorts rose nearly 6% since then.
Vail also approved a 50% increase in quarterly dividend to 62.25 cents which further boosted investors’ confidence.
Why the Upgrade?
Vail Resorts’ revenues missed the Zacks Consensus Estimate, but earnings beat the same. Adjusted earnings of $3.10 per share beat the Zacks Consensus Estimate of $2.30 by 34.8%. Further, earnings surged 93.8% from the year-ago figure of $1.60, primarily due to higher year-over-year revenues and increased adjusted EBITDA margin.
The company’s revenues of $530.2 million increased 17.1% year over year primarily due to higher mountain, lodging and casino revenues. Strong revenues from the Colorado region also aided revenues. In addition, in early February, Vail and Beaver Creek hosted the 2015 World Alpine Ski Championships, which further boosted revenues. The company’s geographic diversity, which is reflected in its presence in most of the markets of the U.S., should drive revenues in the near term.
Further, Vail Resorts benefited from its profit improvement initiatives. Resort EBITDA margin for the quarter improved nearly 450 basis points from the prior year due to the company’s planned initiatives. The company successfully increased its destination visitation and season pass sales, despite unfavorable weather conditions in some regions.
Such favorable earnings and positive sentiment surrounding the stock resulted in the estimate revisions moving north over the past 30 days, and prompted the rank upgrade.
Other Stocks to Consider
In the broader Leisure services sector, investors may consider Live Nation Entertainment, Inc. LYV, Marcus Corp. MCS and Interval Leisure Group, Inc. IILG. While Marcus Corp. and Interval Leisure have a Zacks Rank #2 (Buy), Live Nation Entertainment sports the same Zacks Rank as Vail Resorts
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