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What to Expect from SeaWorld (SEAS) This Earnings Season?

Zacks Equity Research

SeaWorld Entertainment, Inc. SEAS is set to report fourth-quarter and full-year 2016 results on Feb 28, before the market opens.

Last quarter, it posted a negative earnings surprise of 27.36%. In fact, this Florida-based theme park and entertainment company missed earnings in three of the last four quarters with an average miss of 9.85%.

SeaWorld Entertainment, Inc. Price and EPS Surprise

SeaWorld Entertainment, Inc. Price and EPS Surprise | SeaWorld Entertainment, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

SeaWorld has been witnessing a decline in total revenue per capita mostly due to lower attendance. Negative publicity, associated with captive whales and prolonged scrutiny of employee safety practices could continue to hurt revenues in the to-be-reported quarter as well.

Even promotional offerings have not been able to arrest the decline in traffic trends. Also, costs related to marketing and reputation campaigns could eat into profits in the fourth quarter.

Last year, the company announced that it has stopped breeding killer whales. While this move might salvage its reputation among activists and receive positive feedback from people, it will have a negative impact on the company’s revenues, especially from international visitors.

Nevertheless, SeaWorld is making every possible effort to regain customer confidence. The company continues to organize consumer events to drive attendance. Moreover, management is undertaking new initiatives to stabilize and deliver improved results in California, Texas and Florida markets. Capital investments in new rides and attractions, extended hours at SeaWorld Parks and more such strategies should offset the negatives to some extent and attract customers, thereby improving attendance.

Also, the company is undertaking sincere efforts to control costs without harming efficiency, which should help in improving margins in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that SeaWorld is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: SeaWorld has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 13 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: SeaWorld has a Zacks Rank #5 (Strong Sell).
As it is we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the leisure & recreational services sector to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Extended Stay America, Inc. STAY has an Earnings ESP of +21.43% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tribune Media Company TRCO has an Earnings ESP of +4.44% and a Zacks Rank #3.

Red Rock Resorts, Inc. RRR has an Earnings ESP of +3.03% and a Zacks Rank #3.

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