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Vail Resorts (MTN) Up 2.5% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Vail Resorts (MTN). Shares have added about 2.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vail Resorts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Vail Resorts Incurs Narrower-Than-Expected Loss in Q4

Vail Resorts  reported better-than-expected results in fourth-quarter fiscal 2019.

In the quarter under review, the company incurred an adjusted loss of $2.22 per share, narrower than the Zacks Consensus Estimate of a loss of $2.58. In the year-ago quarter, Vail Resorts had incurred an adjusted loss of $2.07 per share.

Quarterly revenues came in at $244 million, outpacing the consensus mark of $241 million and increased 15.3% on a year-over-year basis. Total revenues were driven by growth in each segment. The company’s results also benefited from a robust performance at Whistler Blackcomb, which overshadowed slow start to the Epic Discovery season in Colorado.

Segment Results

Vail Resorts generates revenues from two segments — Resort (99.9% of net revenues in fourth-quarter fiscal 2019) and Real Estate (0.03%). Under the Resort segment, the company has Mountain and Lodging services, and other (constituting 72.1% of net revenues in the fiscal fourth quarter), and Mountain and Lodging retail and dining (27.8%).

Meanwhile, Vail Resorts has two reporting segments — Mountain and Lodging.

The Mountain segment reported revenues of $157.2 million in the quarter under review, up 19.7% year over year. The metric was mainly driven by higher sales from North America pass sales growth, and increased lift, ski and rental revenues. Sales were also driven by non-pass skier visitation at the company’s western U.S. resorts as well as incremental revenues from the Acquired Resorts.

The segment’s EBITDA came in at negative $65.3 million compared with a negative $64.5 million in the prior-year quarter. Operating expenses at the Mountain segment totaled $222.9 million, up 13.6% year over year.

Lodging net revenues in the reported quarter were $86.7 million, up 8.1% year over year on an increase in managed condominium rooms, golf and dining sales.

Under the segment, EBITDA decreased 10.6% to $5.8 million from the prior-year quarter. Operating expenses at the Lodging segment rose 9.7% year over year to $80.8 million.

Operating Results

Vail Resorts reported EBITDA was a negative $59.5 million in the quarter under review compared with a negative $58 million a year ago.

Operating expenses totaled $303.8 million, up 12.5% year over year. Total segmental operating expenses increased 12.6% year over year to $305.3 million.

Balance Sheet

Cash and cash equivalents as of July 31, 2019, were $108.9 million. Net long-term debt as of Jul 31, 2019, was $1,527.7 million.

Vail Resorts approved a quarterly cash dividend of $1.76 per share of common stock, which is payable Oct 25, 2019, to its shareholders of record as of Oct 8, 2019.

Fiscal 2020 Guidance

For fiscal 2020, the company’s total EBIDTA is estimated at $776-$822 million. Net income is projected to be $293-$353 million.

Other Development

Vail Resorts has completed the acquisition of Peak Resorts, Inc. (SKIS) for $11 per share. With the completion of this buyout, the company added 17 U.S. ski areas to its portfolio. The newly acquired resorts are located in the Northeast, Mid-Atlantic and the Midwest. Currently, the company has 37 owned and operated resorts worldwide.

In a bid to enhance the guest experience at the newly acquired resorts, the company plans to invest nearly $15 million over the next two years. Per Vail Resorts, its annual ongoing capital expenditures are likely to increase by nearly $10 million owing to these latest buyouts.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -13.06% due to these changes.

VGM Scores

Currently, Vail Resorts has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Vail Resorts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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