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Bull of the Day: Vail Resorts (MTN)

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I last wrote about Vail Resorts (MTN - Free Report) as a Zacks #1 Rank Strong Buy in December as analysts continued to raise earnings-per-share (EPS) estimates and price targets, and the stock climbed to new highs above $130 on excitement about the newly renovated Park City asset.

What's changed about this story in the past 3 quarters? It's only gotten better.

For a base of comparison, here's what I wrote back then...

For the current fiscal year ending in July, the full-year EPS consensus rose over 15% from $3.33 to $3.85 in the past 90 days. And next year's projections went from $4.18 to $4.45, representing 15.5% annual growth.

Well, Vail Resorts finished its 2016 fiscal year in July with EPS of $4.01, better than the $3.85 consensus almost a year ago. And the current fiscal year (ending July 2017) is now projected to hit EPS of $5.24 -- nearly 18% better than the $4.45 projected in December -- for over 30% growth this year.

Analysts and investors love that kind of growth, and its visible in share prices which hit all-time highs over $160 last month. And the Zacks Rank, driven by analyst estimate revisions, guided investors the whole way by consistently keeping MTN shares a #1 (Strong Buy) or #2 (Buy) for the past year.

Last winter was clearly very good to Vail's business, especially as they capitalized on an acquisition that gave them the largest ski resort in the US. Here's how I described the start of an exciting season right after the company reported a strong Q1 FY 2016...

Early Snow + Park City = Lifting Revenues

November snowstorms in the West allowed Vail Resorts to open its Colorado, Utah and California ski resorts prior to schedule. The pre-Thanksgiving opening of these resorts is expected to boost Vail’s top line in the coming quarter as the company cashes in on the demand for skiing early in the season, especially for those eager to schedule holiday trips.

This includes the newly renovated Park City resort in Utah. Vail bought Park City in Sep 2014 and took over the Canyons resort the year earlier. Later, it joined both through a gondola to form the biggest ski resort in the U.S. Here's how management proudly spoke of their newest achievement in a December 18 press release at the grand opening of the Quicksilver Gondola...

"Park City is one of the most spectacular places on Earth and now, for the first time ever, our guests will have unprecedented access to over 300 trails, 41 lifts and 7,300 acres of skiable terrain across one Park City," said Bill Rock, chief operating officer of Park City. "Quicksilver, Miners Camp and the $50 million in capital improvements across the resort will completely transform the guest experience at Park City. We are thrilled to debut these projects in time for the Christmas holiday."

Further, the company’s two biggest season passes — the Epic and the Epic Local — would give guests access to the both the resorts. This would bring in a large number of guests, which would in turn boost the company’s revenues in the crucial winter months. Vail has been able to raise ticket prices as they watch the volume of ticket sales increase.

(end of December excerpt)

It Has Only Become More Epic

On August 8, Vail Resorts announced a "strategic combination" with Whistler Blackcomb whereby the former would buy all outstanding shares of the latter. That move launched MTN shares from a summer base around $145 to new all-time highs above $150 and they've never looked down since.

Rob Katz, chairman and chief executive officer of Vail Resorts, described the partnership thus...

"Whistler Blackcomb is one of the most iconic mountain resorts in the world with an incredible history, passionate employees and a strong community. With our combined experience and expertise, together we will build upon the guest experience at Whistler Blackcomb while preserving the unique brand and character of the resort as an iconic Canadian destination for guests around the world. We are delighted to add such a renowned resort to Vail Resorts and look forward to expanding our relationships in the Sea-to-Sky community, British Columbia and Canada," said

Then on September 1, Vail Resorts announced the addition of European ski resorts in France, Italy, Switzerland and Austria to its industry-leading season pass. Here were the bullet highlights from the company press release...

- The Epic Pass Is The ONLY Multi-Resort Pass To Offer Significant Access To European Resorts

- The Epic Pass Also Features Unlimited, Unrestricted Access To World-Class Resorts In Colorado, Utah And Tahoe For Just $809

- Epic Pass Holders Now Have Access To The Best Skiing In Six Countries

- The Deadline For The Lowest Price Is Monday, Sept. 5, 2016

Analysts will be looking forward to Q1 fiscal year 2017 earnings in early December to see how many of those truly Epic passes were snatched up.

Analysts Happy to Wait in this Lift Line

Speaking of the analysts, I want to give credit where it's due to those who praised this company, its management team, and its growth path last year. Here's who got it right last year when I wrote my December report...

On December 8, 2016, Goldman Sachs upgraded Vail Resorts from Neutral to Buy with a price target of $144.

And the analysts at Janney Montgomery Scott took the opportunity to visit one of their favorite leisure companies [that month], concluding that the $50 million in capital improvements at Park City was an investment well spent. They rated shares a Buy with a fair value of $142 and here's what they had to say...

"Given the FCF outlook and numerous opportunities for growth, we believe the stock is undervalued. We also think MTN is well positioned to benefit from several secular drivers within the ski industry, including the lack of new supply, which allows for pricing power."

The Path to a $200 Stock

Now, let's hear from a humble group of analysts at Wells Fargo who finally get it and aren't afraid to say so. They were basically neutral on MTN shares, rating them Market Perform last winter, but steadily increasing estimates as the story grew. By June, they had increased their valuation range from $120-130 to $150-160, though keeping the rating at MP.

But last week, they finally upgraded MTN to Outperform after they updated their model following this month's closing of the Whistler Blackcomb acquisition. Their FY17 EPS estimate jumped to $5.68 from $4.90.

According to the story on October 20, the Wells Fargo valuation range for MTN increased to $165-180 per share and analyst Cameron McKnight said he saw "a path to $200 in an upside scenario."

In the report titled "Better Late Than Never," the analysts spoke of the potential upside from a strong management team and strong industry fundamentals.

The top, and the bottom, of this world-class lift line just keeps getting better.

And the next quarterly report for Vail Resorts should continue to break top and bottom line records. This could easily shoot the stock to new all-time highs above $170. Grabbing some shares now under $160 seems like a good risk/reward idea to me.

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