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Amid constant negative publicity, SeaWorld Entertainment Inc. (SEAS - Snapshot Report) announced its plans to expand killer whale habitats at three of its parks. This amusement and theme park company announced that it will spend multi million dollars to facilitate the expansion in the coming years. The first expanded habitat is scheduled to open in San Diego in 2018 followed by Orlando, FL and San Antonio.

The new habitat at the San Diego location is expected to have total water volume of 10 million gallons, almost double than the current facility. With maximum depth of 50 feet, surface area of nearly 1.5 acres and spanning more than 350 feet in length, this habitat will offer the world’s largest underwater viewing experience of killer whales with a 40-foot high glass viewing wall, according to the company.

Also, the facility will include a water treadmill system, which will allow the whales to swim against a stream of moving water. Moreover, the company intends to invest $10 million on killer whale research and conservation projects.

The decision to expand the habitats comes on the heels of negative publicity faced by the company after the release of Blackfish, a documentary aired by CNN in 2013. The documentary focused on the issues pertaining to the treatment of whales in captivity. It also highlighted the death of a trainer at one of the company’s parks. This lowered attendance at the company’s theme parks. It seems SeaWorld Entertainment decided to provide bigger homes to these killer whales to bring back the crowds.

We believe this expansion is the need of the hour. Lower attendance immensely affected the second quarter results of the company and outlook for the year. On Aug 13, 2014, the company posted disappointing second quarter results due lower attendance as a result of increased pressure and protests to discontinue killer whale attractions.  Earnings and revenue both missed the Zacks Consensus Estimate.  Given the results, the company cut its outlook for 2014.

Share price of this Zacks Rank #5 (Strong Sell) company declined 33% in response to the weak results and the downside continues. Also, Moody's Corporation (MCO - Analyst Report) revised its rating outlook to Stable from Positive, given the lowered outlook provided by the company.

Though animal rights group People for the Ethical Treatment of Animals was reportedly not satisfied with the company’s moves, we need to wait and see the impact of these initiatives on its traffic and revenues.

Some better-ranked stocks in the sector include Diamond Resorts International, Inc. (DRII - Snapshot Report) and HomeAway, Inc. (AWAY - Snapshot Report). Both these stocks carry a Zacks Rank #2 (Buy).

 

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