Here's Why You Should Retain Vail Resorts (MTN) Stock Now
Vail Resorts, Inc. MTN is likely to benefit from a solid season pass program, investments in expansion projects and technological enhancements. However, the coronavirus-induced soft traffic and high labor costs are a concern.
Let us discuss the factors that suggest investors should retain the stock for the time being.
Growth Catalysts
Vail Resorts has been witnessing solid season pass sales for the upcoming 2022/2023 North American ski season. Season-to-date (through Sep 23, 2022), the company stated that Pass product sales increased approximately 6% in units and approximately 7% in sales dollars compared with the prior-year period’s (through Sep 24, 2021) levels. The company reported strong unit growth with respect to its renewing pass holders in destination markets. Also, it stated benefits from a 7.5% price increase (relative to the 2021/2022 season). Given the strong trade-up results coupled with minimal degradation (relative to spring pass sales), the company expects December 2022 growth rates to be relatively consistent with September 2022 growth rates.
The company continues to reinvest in its resorts to boost customer traffic. In Vail Mountain, the company announced plans to install a four-person high-speed lift in the Sun Down Bowl and replace a four-person lift with a new six-person high-speed lift in the Game Creek Bowl. At Whistler Blackcomb, the company intends to replace the four-person high-speed Big Red Express lift with a six-person high-speed lift and replace the six-person Creekside Gondola with a new 10-person high-speed gondola. MTN announced installing new (or replacement lifts) at Breckenridge, Northstar (NSTR), Heavenly, Stowe, Mount Snow, Attitash, Jack Frost, Big Boulder, Boston Mills and Brandywine. While 18 lift projects are on track for the 2022/2023 season, three projects are expected to be completed in 2023, subject to regulatory approvals.
Apart from lift upgrades, the company is focused on technological enhancements to support its data-driven approach, guest experience and corporate infrastructure. During the fiscal fourth quarter of 2022, the company forwarded plans to introduce new technology for the 2023/2024 North American ski season. The technology will allow guests to store their pass product or lift ticket directly on their phone, eliminating the need for carrying plastic cards, visiting the ticket window or waiting to receive a pass or lift ticket in the mail. Also, it initiated work on network-wide scalable technology that will enhance analytics, e-commerce and guest engagement tools. The initiative will likely pave a path to target guest outreach, personalize messages and improve conversion.
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In the past three months, shares of the company have declined 1.8% compared with industry’s 7.8% fall.
Concerns
Although the company is optimistic about the 2022 performance, the coronavirus-related woes cannot be ruled out. In the fiscal fourth quarter, the company’s operations were negatively impacted by the coronavirus-induced operational restrictions, capacity constraints and staffing challenges. Also, the company’s ancillary businesses were affected by the same. Even though the company is witnessing sequential improvements in visitation, it is still lower than the pre-pandemic levels. Given the crisis’s uncertainty, chances of future outbreaks and prolonged shutdowns cannot be ruled out.
The company’s margins have been bearing the brunt of inflationary labor costs. In the fiscal fourth quarter, the company’s margins were affected by inflationary labor costs. In the quarter, labor-related costs increased 22.5%, primarily due to increased staffing associated with improved North American operations, owing to fewer COVID-19-related limitations and restrictions and improved demand on a year-over-year basis. The company stated that it increased focus on hiring, retention, and talent development for supporting business operations in the upcoming periods. For fiscal 2023, the company anticipates labor expenses, including inflationary adjustments, to be more than $175 million from fiscal 2022 levels.
Zacks Rank & Key Picks
Vail Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hyatt Hotels Corporation H, Crocs, Inc. CROX and Boyd Gaming Corporation BYD.
Hyatt currently carries a Zacks Rank #1. H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 11.8% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and earnings per share (EPS) indicates a surge of 92.6% and 121.8%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2 (Buy). CROX has a long-term earnings growth rate of 15%. Shares of Crocs have plunged 45% in the past year.
The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s levels.
Boyd Gaming carries a Zacks Rank #2. BYD has a long-term earnings growth rate of 12.8%. The stock has increased 1.2% in the past year.
The Zacks Consensus Estimate for BYD’s 2022 sales and EPS indicates growth of 4.5% and 12.5%, respectively, from the year-ago period’s reported levels.
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