The Ratings Game: Forget the fish: People are going to SeaWorld for free beer

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One of the most popular attractions at SeaWorld Entertainment Inc. during the third quarter had nothing to do with the wildlife – people were enjoying lots of free beer.

SeaWorld SEAS, +1.27% executives have taken a number of steps to improve business performance, including focusing on season passes to drive attendance. On the earnings call, Chief Executive John Reilly said the company’s free beer promotion has also proved to be popular.

“[W]e’ve committed to bring that promotion back to both parks [SeaWorld Orlando and Busch Gardens Tampa Bay] this summer,” Reilly said on the call, according to a FactSet transcript. “In fact, our free beer promotion will be available year-round at Busch Gardens Tampa Bay starting in January as part of their 60th anniversary celebration.”

Bier Fest also made a return appearance at Busch Gardens Williamsburg for the third year. And that event was launched at SeaWorld San Antonio.

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Other SeaWorld attractions to come include what will be Florida’s tallest roller coaster, Tigris, which will have educational content about tigers along the queue; Sesame Street at SeaWorld Orlando; and Tidal Twister, a roller coaster that will include Rising Tide Conservation, a focus on protecting the oceans and coral reefs, which is coming to SeaWorld San Diego in 2019.

Overall, successful events were part of the reason Reilly gave for the better-than-expected revenue results. Revenue totaled $483.2 million, up from $437.7 million and ahead of the $475.0 million. Admission revenue was up 5.6% to $279.9 million, and food, merchandise and other revenue was up 17.7% to $203.3 million.

Earnings of $1.10 per share were below the FactSet guidance of $1.11 per share.

Shares closed Monday down 4.3%, and are down 0.6% in Tuesday trading.

“In our view, these strong results were more than just the benefit of ‘easy comps’ as SeaWorld continues to make significant progress on strategic pricing, new attraction/events and streamlining its overhead cost base,” wrote SunTrust Robinson Humphrey analysts in a note.

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They rate SeaWorld shares buy with a $36 price target.

Wedbush analysts weigh the price decline versus the attendance increase.

“On the one hand, this is a trade-off that investors would be more than willing to accept going forward, especially when coupled with high-single digit attendance growth,” analysts wrote in a note. “On the other, investors are unlikely to see high-single digit in-park growth as a sustainable trend, and at least some of the excitement surrounding the 10% attendance growth number announced in early October was undone by a 4% decline in ticket prices.”

Wedbush rates SeaWorld shares neutral with a $27 price target.

KeyBanc Capital Markets upgraded SeaWorld to overweight less than one week ago, confident that the company’s turnaround is under way.

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Analysts think the quarterly results are “a concrete step in the right direction,” and they “continue to see a clearer path toward the $475 million to $500 million FY20 Ebitda [earnings before interest, tax, depreciation and amortization] target.”

KeyBanc has a $35 price target on SeaWorld shares.

SeaWorld shares have skyrocketed 127.5% over the past year while the S&P 500 index SPX, +0.62%   has gained 6.1% for the period.