Vail Resorts (MTN): Zacks Rank Buy

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Vail Resorts Inc. (MTN) has experienced sharp upward revisions in earnings estimates over the past seven days, as an increase in summer guests led to solid fiscal fourth quarter results. The resort operator hit a 52-week high on September 25, the day of its earnings release, and then reached a Zacks #1 Rank (Strong Buy) on September 28.

Fiscal Fourth-Quarter Beat

Vail Resorts reported a fourth quarter fiscal 2012 loss per share of $1.50, narrower than the Zacks Consensus Estimate for a loss of $1.56. In the year-ago quarter, the company lost $1.49.

Total net revenues increased 4.5% year over year to $113.5 million. Net revenue for the Mountain segment jumped 11.3% to $46.4 million, while net sales for the lodging segment inched up 0.7% to $54.8 million. However, net revenue for the real estate segment fell 1.5% to $12.4 million.

The company's reported Resort EBITDA reflects better performance of the Mountain and Lodging segments, which improved 1.4% year over year, driven by enhanced summer guest visitation.

At the end of the quarter, the liquidity position remained sound with cash in hand of $46.1 million and no borrowing under the revolving senior credit facility. The company has virtually no principal payments due on debt until 2019.

Promising Outlook

Pre-season sales for 2012-2013 Vail Resorts season passes appear strong. For fiscal 2013, the company expects net income in the range of $49.9 million to $59.9 million and Resort EBITDA between $260 million and $270 million, reflecting an upside of 27% to 32% year over year.

Surge in Earnings Estimates

In the past 7 days, the Zacks Consensus Estimate for fiscal 2013 climbed 23.0% to $1.50 per share on the back of upward revisions from seven of nine estimates. The current estimate implies year-over-year growth of 233.8%.

For fiscal 2014, the Zacks Consensus Estimate is $1.86 per share, exhibiting an increase of 31.9% in the last 7 days aided by two upward revisions out of five estimates. The current estimate suggests year-over-year growth of 24.1%.

Premium Valuation

Shares of Vail Resorts currently trade at a premium on a price-to-earnings (P/E) and price-to-sales (P/B) basis. On a forward P/E basis, shares are trading at 38.38x, versus the peer group average of 30.39x. On a P/B basis, shares are trading at 2.55x, versus 2.11x for the peer group average. A healthy earnings growth prospect warrants the premium valuation of the company. Moreover, the company's long-term estimated earnings per share growth rate remains strong at 16.4%.

Chart Shows Strong Momentum

The stock has been trading above its 50 and 200-day moving averages since June 4, 2012. The widening gap between the stock price line and that of the 50 and 200-day moving average lines show the growing momentum of Vail Resorts.

Volume is fairly strong, averaging roughly 271K daily. The year-to-date return for the stock is 36.1% compared with the S&P 500's return of 14.7%.

Founded in 1997 and headquartered in Broomfield, Colorado, Vail Resorts is one of the leading mountain resort operators in North America. The company operates in three segments - Mountain, Lodging and Real Estate. With a market capitalization of $2.05 billion, Vail Resorts primarily competes with HomeAway Inc. (AWAY) and Carnival Corporation (CCL).


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