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4 Top Picks From Promising Leisure & Recreation Services Industry
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Despite the Zacks Leisure and Recreation Services industry bearing the brunt of the coronavirus pandemic, it is gradually coming out of the woods on the back of the reopening of the economy. With increased focus on streamlining cost structures and the optimization of business processes, the industry on the whole has shown some resilience. Industry players like SeaWorld Entertainment, Inc. , Cedar Fair, L.P. (FUN - Free Report) , RCI Hospitality Holdings, Inc. (RICK - Free Report) and Bluegreen Vacations Holding Corporation are likely to gain in their respective fields, supported by consistent strategic partnerships, digital initiatives and economic improvements.
Industry Description
The Zacks Leisure and Recreation Services industry comprises a wide range of recreation providers such as cruise, entertainment and media owners, golf-related leisure and entertainment venue business, theme park makers, resort operators and event organizers. Some of the industry players also have ski and sports businesses, while some operate health and wellness centers onboard cruise ships and at destination resorts. Some of the companies are engaged in hospitality and related businesses. A few of the industry participants also provide weight management products and services. These companies primarily thrive on overall economic growth, which fuels consumer demand for products. Demand, which is highly dependent on business cycles, is driven by a healthy labor market, rising wages and growing disposable income.
4 Trends Shaping the Future of Leisure & Recreation Services Industry
Cruise Operators Recovering From Pandemic Blues: The cruise industry is bearing the brunt of the coronavirus pandemic. Cruise operators are slowly recovering on the back of the resumption of services. Cruise stocks are benefiting from strong demand and growth in booking volume. Despite the impact of the coronavirus pandemic, the Norwegian Cruise’s overall cumulative booked position for full-year 2022 is in line with 2019’s record levels. Also, focusing on fleet-expansion efforts is helping the company to gain traction. Royal Caribbean anticipates operating at 95% during first-quarter 2022. The company expects operating ships to generate positive cash flow during first-quarter 2022. However, China, which is closed for international travelers, will continue to hurt cruise operators.
Rebounding Economy: The industry is likely to gain from a decline in the unemployment rate. According to the U.S. Bureau of Labor Statistics, 678,000 new non-farm jobs were created last month, up from the expectation of 440,000. The unemployment rate declined to 3.8%. Leisure & Hospitality jobs gained 179,000. With restrictions being lifted, Americans are venturing out and engaging in outdoor recreation. This, in turn, has been bolstering consumer confidence consistently.
Theme Park Operators & Live Entertainment Companies Bouncing Back: The theme park industry, which was rattled by the coronavirus pandemic, has been benefiting from the reopening of parks. Theme Park operators have been gaining from improving visitation. Consumer spending at theme parks has been rising. Meanwhile, live entertainment firms have been benefiting from pent-up demand for live events and robust ticket sales. With ramped-up vaccinations, live music events have returned in the second half of 2021. The company’s U.S. concerts are now fully open.
Liquidity a Major Factor Amid Pandemic: Maintaining liquidity has become a herculean task for a number of industry participants in the current scenario. Most of the companies are cutting pay and furloughing employees. The industry players are suspending share repurchase programs and dividend payouts to improve liquidity. Supply chain disruptions due to the pandemic are likely to hurt the industry in the near term.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Leisure and Recreation Services industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #114, which places it in the top 46% of 249 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is the result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in the group’s earnings growth potential. Since Dec 31, 2021, the industry’s loss estimates for the current year have moved south by 93.1%.
Before we present a few stocks that investors can take a look at, let’s analyze the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Services industry has underperformed the Zacks S&P 500 composite but outperformed its sector over the past year. Stocks in the industry have collectively declined 31.4% in the past year compared with the broader sector’s decline of 33.9%. The S&P 500 has gained 7.6% in the said time frame.
One Year Price Performance
Valuation
On the basis of the forward 12-month EV/EBITDA (Enterprise Value/Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing debt-laden leisure service stocks, the industry trades at 50.99X compared with the S&P 500’s 16.55X and the sector’s 11.77X. Over the past five years, the industry has traded as high as 55.58X and as low as 5.8X, with the median being at 9.47X, as the charts show.
EV/EBITDA Ratio (F12M) Compared With S&P
4 Leisure and Recreation Services Stocks Worth Betting On
SeaWorld Entertainment: Headquartered in Orlando, FL, the company was founded in 1959. Together with its subsidiaries, SEAS operates as a theme park and entertainment company in the United States. The company is benefiting from an increase in attendance. In fourth-quarter 2021, attendance was 5.0 million guests, up 2.7 million guests year over year. Attendance rose 5.4% from fourth-quarter 2019 levels.
Shares of this Zacks Rank #1 (Strong Buy) company have gained 29.7% in the past year. In the past 60 days, earnings estimates for 2022 have been revised upward by 16.5% to $4.10. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: SEAS
Cedar Fair: Headquartered in Sandusky, OH, the company owns and operates amusement and water parks and complimentary resort facilities in the United States and Canada. The company is benefiting from an increase in attendance and robust in-park per capita spending. During fourth-quarter 2021, in-park per capita spending came in at $62.03, suggesting a 28% increase from 2019 levels.
Shares of this Zacks Rank #1 company have gained 1.2% in the past year. The company’s earnings for fiscal 2022 are likely to increase 621.7%. The consensus mark for fiscal 2022 earnings has increased 12.9% in the past 30 days, which highlights analysts’ optimism regarding the stock’s growth potential.
Price and Consensus: FUN
RCI Hospitality Holdings: Based in Houston, TX, the company operates through Nightclubs, Bombshells and Other segments. The company has been gaining from the robust performance of bombshells and nightclubs. The company recently completed the acquisitions of 12 clubs.
Shares of this Zacks Rank #2 company have declined 16.2% in the past year. The company’s earnings for fiscal 2022 are likely to increase 19.6%. In the past 30 days, earnings estimates for 2022 have been revised upward by 0.6% to $4.88.
Price and Consensus: RICK
Bluegreen Vacations: Headquartered in Boca Raton, FL, the company operates as vacation ownership. Bluegreen Vacations is benefiting from system-wide sales of vacation ownership interests ("VOIs") and record sales of vacation packages. The company has been gaining from its “Bluegreen Renewal” initiative — a company-wide effort to revive sales, revenue growth and efficiency. Bluegreen Renewal initiative has been driving the company’s average sales price per transaction and credit qualified guests. A rise in occupancy bodes well. The robust demand for resort stays from Bluegreen Vacation Club owners has been favoring the company.
Shares of this Zacks Rank #2 company have gained 57.2% in the past year. The company’s earnings for fiscal 2022 are likely to increase 20.8%. The consensus mark for fiscal 2022 earnings has increased 19.9% in the past 30 days, which highlights analysts’ optimism regarding the stock’s growth potential.
Price and Consensus: BVH
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4 Top Picks From Promising Leisure & Recreation Services Industry
Despite the Zacks Leisure and Recreation Services industry bearing the brunt of the coronavirus pandemic, it is gradually coming out of the woods on the back of the reopening of the economy. With increased focus on streamlining cost structures and the optimization of business processes, the industry on the whole has shown some resilience. Industry players like SeaWorld Entertainment, Inc. , Cedar Fair, L.P. (FUN - Free Report) , RCI Hospitality Holdings, Inc. (RICK - Free Report) and Bluegreen Vacations Holding Corporation are likely to gain in their respective fields, supported by consistent strategic partnerships, digital initiatives and economic improvements.
Industry Description
The Zacks Leisure and Recreation Services industry comprises a wide range of recreation providers such as cruise, entertainment and media owners, golf-related leisure and entertainment venue business, theme park makers, resort operators and event organizers. Some of the industry players also have ski and sports businesses, while some operate health and wellness centers onboard cruise ships and at destination resorts. Some of the companies are engaged in hospitality and related businesses. A few of the industry participants also provide weight management products and services. These companies primarily thrive on overall economic growth, which fuels consumer demand for products. Demand, which is highly dependent on business cycles, is driven by a healthy labor market, rising wages and growing disposable income.
4 Trends Shaping the Future of Leisure & Recreation Services Industry
Cruise Operators Recovering From Pandemic Blues: The cruise industry is bearing the brunt of the coronavirus pandemic. Cruise operators are slowly recovering on the back of the resumption of services. Cruise stocks are benefiting from strong demand and growth in booking volume. Despite the impact of the coronavirus pandemic, the Norwegian Cruise’s overall cumulative booked position for full-year 2022 is in line with 2019’s record levels. Also, focusing on fleet-expansion efforts is helping the company to gain traction. Royal Caribbean anticipates operating at 95% during first-quarter 2022. The company expects operating ships to generate positive cash flow during first-quarter 2022. However, China, which is closed for international travelers, will continue to hurt cruise operators.
Rebounding Economy: The industry is likely to gain from a decline in the unemployment rate. According to the U.S. Bureau of Labor Statistics, 678,000 new non-farm jobs were created last month, up from the expectation of 440,000. The unemployment rate declined to 3.8%. Leisure & Hospitality jobs gained 179,000. With restrictions being lifted, Americans are venturing out and engaging in outdoor recreation. This, in turn, has been bolstering consumer confidence consistently.
Theme Park Operators & Live Entertainment Companies Bouncing Back: The theme park industry, which was rattled by the coronavirus pandemic, has been benefiting from the reopening of parks. Theme Park operators have been gaining from improving visitation. Consumer spending at theme parks has been rising. Meanwhile, live entertainment firms have been benefiting from pent-up demand for live events and robust ticket sales. With ramped-up vaccinations, live music events have returned in the second half of 2021. The company’s U.S. concerts are now fully open.
Liquidity a Major Factor Amid Pandemic: Maintaining liquidity has become a herculean task for a number of industry participants in the current scenario. Most of the companies are cutting pay and furloughing employees. The industry players are suspending share repurchase programs and dividend payouts to improve liquidity. Supply chain disruptions due to the pandemic are likely to hurt the industry in the near term.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Leisure and Recreation Services industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #114, which places it in the top 46% of 249 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is the result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in the group’s earnings growth potential. Since Dec 31, 2021, the industry’s loss estimates for the current year have moved south by 93.1%.
Before we present a few stocks that investors can take a look at, let’s analyze the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Services industry has underperformed the Zacks S&P 500 composite but outperformed its sector over the past year. Stocks in the industry have collectively declined 31.4% in the past year compared with the broader sector’s decline of 33.9%. The S&P 500 has gained 7.6% in the said time frame.
One Year Price Performance
Valuation
On the basis of the forward 12-month EV/EBITDA (Enterprise Value/Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing debt-laden leisure service stocks, the industry trades at 50.99X compared with the S&P 500’s 16.55X and the sector’s 11.77X. Over the past five years, the industry has traded as high as 55.58X and as low as 5.8X, with the median being at 9.47X, as the charts show.
EV/EBITDA Ratio (F12M) Compared With S&P
4 Leisure and Recreation Services Stocks Worth Betting On
SeaWorld Entertainment: Headquartered in Orlando, FL, the company was founded in 1959. Together with its subsidiaries, SEAS operates as a theme park and entertainment company in the United States. The company is benefiting from an increase in attendance. In fourth-quarter 2021, attendance was 5.0 million guests, up 2.7 million guests year over year. Attendance rose 5.4% from fourth-quarter 2019 levels.
Shares of this Zacks Rank #1 (Strong Buy) company have gained 29.7% in the past year. In the past 60 days, earnings estimates for 2022 have been revised upward by 16.5% to $4.10. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: SEAS
Cedar Fair: Headquartered in Sandusky, OH, the company owns and operates amusement and water parks and complimentary resort facilities in the United States and Canada. The company is benefiting from an increase in attendance and robust in-park per capita spending. During fourth-quarter 2021, in-park per capita spending came in at $62.03, suggesting a 28% increase from 2019 levels.
Shares of this Zacks Rank #1 company have gained 1.2% in the past year. The company’s earnings for fiscal 2022 are likely to increase 621.7%. The consensus mark for fiscal 2022 earnings has increased 12.9% in the past 30 days, which highlights analysts’ optimism regarding the stock’s growth potential.
Price and Consensus: FUN
RCI Hospitality Holdings: Based in Houston, TX, the company operates through Nightclubs, Bombshells and Other segments. The company has been gaining from the robust performance of bombshells and nightclubs. The company recently completed the acquisitions of 12 clubs.
Shares of this Zacks Rank #2 company have declined 16.2% in the past year. The company’s earnings for fiscal 2022 are likely to increase 19.6%. In the past 30 days, earnings estimates for 2022 have been revised upward by 0.6% to $4.88.
Price and Consensus: RICK
Bluegreen Vacations: Headquartered in Boca Raton, FL, the company operates as vacation ownership. Bluegreen Vacations is benefiting from system-wide sales of vacation ownership interests ("VOIs") and record sales of vacation packages. The company has been gaining from its “Bluegreen Renewal” initiative — a company-wide effort to revive sales, revenue growth and efficiency. Bluegreen Renewal initiative has been driving the company’s average sales price per transaction and credit qualified guests. A rise in occupancy bodes well. The robust demand for resort stays from Bluegreen Vacation Club owners has been favoring the company.
Shares of this Zacks Rank #2 company have gained 57.2% in the past year. The company’s earnings for fiscal 2022 are likely to increase 20.8%. The consensus mark for fiscal 2022 earnings has increased 19.9% in the past 30 days, which highlights analysts’ optimism regarding the stock’s growth potential.
Price and Consensus: BVH