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Bear of the Day: Cedar Fair (FUN)

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Cedar Fair Entertainment Company (FUN - Free Report) missed second quarter estimates as attendance at its parks dropped. This Zacks Rank #5 (Strong Sell) also warned that it might not be able to meet its full year guidance.

Cedar Fair operates 11 amusement parks across the United States including Knott's Berry Farm, Kings Island and its flagship, Cedar Point. It also operates two outdoor water parks, one indoor water park and four hotels.

Big Miss in the Second Quarter

On Aug 1, Cedar Fair reported its second quarter results and missed on the Zacks Consensus Estimate by $0.53, or 57%. It reported $0.39 versus the consensus of $0.92.

Bad weather in the Mid-Atlantic region and a delayed ride opening at California's Great America, combined with a decrease in the number of season passes sold at Kings Island, impacted early season attendance which fell 2% to 8.7 million.

Cedar Fair did see an increase in the average in-ark per capita spending driven by more spending on food and beverage, merchandise and extra charge attractions.

Additionally, its four hotels are performing well with higher occupancy rates and higher average daily room rates.

Rising costs hurt though, as labor costs rose due to the rise in minimum wages in many locations.

July Looked Weak

The company gave an update on what was happening in July, through the first 7 months of the year, and revenue was still down 2% compared to 2017.

The decrease in revenue was attributable to a 3%, or 480,000-visit, decrease in attendance to 14.6 million guests.

Because they haven't seen any pickup in momentum in July, and it is the company's peak month, it's unclear if they will meet their full year revenue guidance.

The company will provide another update in the September conference call.

Estimates Being Lowered

Given the big second quarter miss and uncertainty about the full year, the analysts are already moving to lower their 2018 and 2019 estimates.

One estimate was lowered in the last week for 2018 which has pushed the Zacks Consensus Estimate down to 43.13 from $3.44 thirty days ago. That's a decline of 22.7% as the company made $4.05 in 2017.

2 estimates have also been lowered for 2019 in the last 7 days. That has pushed the Zacks Consensus down to $3.53 from $3.87.

Shares Tank

Shares of Cedar Fair sold off on the news and are now down 21% year-to-date.



However, the distribution to the unitholders remains intact and unaffected and that is still yielding 5.5%.

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