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Vail Resorts (MTN) Banks on Season Pass Program Amid High Costs
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Vail Resorts, Inc. (MTN - Free Report) is expected to benefit from the solid season pass program, acquisition initiatives and investments in expansion projects. However, the coronavirus-induced soft traffic and high labor costs are concerning.
Let us delve into the factors that suggest that investors should hold on to the stock for the time being.
Growth Catalysts
Vail Resorts has been witnessing higher season pass sales lately. In the fiscal second quarter, the company witnessed 69% visitation from its season pass holders compared with 56% in the prior-year quarter. Markedly, the company has been benefiting from its offerings such as Epic Pass, Epic Local Pass, Epic Day Pass and Epic Coverage.
Going forward, Vail Resorts is optimistic about strong leisure travel demand and unit growth in terms of renewing pass holders. The company’s ability to leverage guest data, targeted digital marketing efforts, broad product offering, and associated discounts are likely to yield in the upcoming periods.
Vail Resorts focuses on acquisition initiatives to drive growth. On Mar 28, 2022, the company entered an agreement to acquire a 55% stake in Andermatt-Sedrun Sport AG, a destination ski resort in Central Switzerland. This marks the company's first strategic investment to operate in Europe. Per the agreement, Vail Resorts will be provided access to the resort's mountain and ski-related assets, including lifts, restaurants and a ski school operation.
The company anticipates the partnership to drive growth from investments in the resort (CHF 110 million), development in the base area (CHF 39 million) and the resort’s inclusion in the Epic Pass products. However, it stated that capital investment plans are subject to approval and permits from the local municipalities. The company expects to close the deal prior to the 2022-23 ski and ride season, subject to certain third-party consent. It anticipates the initiative to generate more than CHF 5 million EBITDA in the fiscal year ending Jul 31, 2024.
Meanwhile, the company continues to reinvest in its resorts to boost customer traffic. For fiscal 2022, it has set aside approximately $315-$325 million to provide increased lift capacity and enhance the guest experience. The plan includes the installation of 21 new or replacement lifts across 14 of its resorts. It also includes a transformational lift-served terrain expansion at Keystone. The company believes that the initiative will boost the lift capacity by more than 45% in those locations. However, Vail Resorts stated that developments are subject to regulatory approvals.
Apart from lift upgrade and terrain expansion projects, the company is focused on technological enhancements to support its data-driven approach, guest experience and corporate infrastructure.
Concerns
Image Source: Zacks Investment Research
Shares of Vail Resorts have declined 18.2% so far this year compared with the industry’s 1.4% fall. The downside was mainly due to the coronavirus crisis. In the second quarter of fiscal 2022, the company’s operations were negatively impacted by the coronavirus-induced travel trends at Whistler Blackcomb and Australian resorts, operational restrictions, and staffing challenges. Even though the company is witnessing sequential improvements in visitation, it is still lower than the pre-pandemic levels. Due to the crisis's uncertain nature, future outbreaks and prolonged shutdowns cannot be ruled out.
Meanwhile, the company’s margins have been bearing the brunt of inflationary labor costs. In the fiscal second quarter, labor-related costs increased 22.7% primarily due to increased staffing associated with improved North America operations on fewer COVID-related limitations and restrictions, and improved demand on a year-over-year basis. The company stated that it increased its focus on hiring, retention and talent development for supporting business operations in the upcoming periods. For fiscal 2023, it anticipates labor expenses, including inflationary adjustments, to be more than $175 million from the fiscal 2022 levels.
Funko sports a Zacks Rank #1 at present. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have declined 10% in the past year.
The Zacks Consensus Estimate for Funko’s current financial-year sales and EPS (earnings per share) suggests growth of 22.7% and 26.8%, respectively, from the year-ago period’s reported levels.
JAKKS Pacific presently sports a Zacks Rank #1. JAKK has a trailing four-quarter earnings surprise of 63.1%, on average. Shares of the company have surged 115% in the past year.
The Zacks Consensus Estimate for JAKK’s current financial-year sales and EPS indicates growth of 4.4% and 8.5%, respectively, from the year-ago period’s reported levels.
Bluegreen Vacations presently carries a Zacks Rank #2 (Buy). BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has surged 63.2% in the past year.
The Zacks Consensus Estimate for BVH’s current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s reported levels.
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Vail Resorts (MTN) Banks on Season Pass Program Amid High Costs
Vail Resorts, Inc. (MTN - Free Report) is expected to benefit from the solid season pass program, acquisition initiatives and investments in expansion projects. However, the coronavirus-induced soft traffic and high labor costs are concerning.
Let us delve into the factors that suggest that investors should hold on to the stock for the time being.
Growth Catalysts
Vail Resorts has been witnessing higher season pass sales lately. In the fiscal second quarter, the company witnessed 69% visitation from its season pass holders compared with 56% in the prior-year quarter. Markedly, the company has been benefiting from its offerings such as Epic Pass, Epic Local Pass, Epic Day Pass and Epic Coverage.
Going forward, Vail Resorts is optimistic about strong leisure travel demand and unit growth in terms of renewing pass holders. The company’s ability to leverage guest data, targeted digital marketing efforts, broad product offering, and associated discounts are likely to yield in the upcoming periods.
Vail Resorts focuses on acquisition initiatives to drive growth. On Mar 28, 2022, the company entered an agreement to acquire a 55% stake in Andermatt-Sedrun Sport AG, a destination ski resort in Central Switzerland. This marks the company's first strategic investment to operate in Europe. Per the agreement, Vail Resorts will be provided access to the resort's mountain and ski-related assets, including lifts, restaurants and a ski school operation.
The company anticipates the partnership to drive growth from investments in the resort (CHF 110 million), development in the base area (CHF 39 million) and the resort’s inclusion in the Epic Pass products. However, it stated that capital investment plans are subject to approval and permits from the local municipalities. The company expects to close the deal prior to the 2022-23 ski and ride season, subject to certain third-party consent. It anticipates the initiative to generate more than CHF 5 million EBITDA in the fiscal year ending Jul 31, 2024.
Meanwhile, the company continues to reinvest in its resorts to boost customer traffic. For fiscal 2022, it has set aside approximately $315-$325 million to provide increased lift capacity and enhance the guest experience. The plan includes the installation of 21 new or replacement lifts across 14 of its resorts. It also includes a transformational lift-served terrain expansion at Keystone. The company believes that the initiative will boost the lift capacity by more than 45% in those locations. However, Vail Resorts stated that developments are subject to regulatory approvals.
Apart from lift upgrade and terrain expansion projects, the company is focused on technological enhancements to support its data-driven approach, guest experience and corporate infrastructure.
Concerns
Image Source: Zacks Investment Research
Shares of Vail Resorts have declined 18.2% so far this year compared with the industry’s 1.4% fall. The downside was mainly due to the coronavirus crisis. In the second quarter of fiscal 2022, the company’s operations were negatively impacted by the coronavirus-induced travel trends at Whistler Blackcomb and Australian resorts, operational restrictions, and staffing challenges. Even though the company is witnessing sequential improvements in visitation, it is still lower than the pre-pandemic levels. Due to the crisis's uncertain nature, future outbreaks and prolonged shutdowns cannot be ruled out.
Meanwhile, the company’s margins have been bearing the brunt of inflationary labor costs. In the fiscal second quarter, labor-related costs increased 22.7% primarily due to increased staffing associated with improved North America operations on fewer COVID-related limitations and restrictions, and improved demand on a year-over-year basis. The company stated that it increased its focus on hiring, retention and talent development for supporting business operations in the upcoming periods. For fiscal 2023, it anticipates labor expenses, including inflationary adjustments, to be more than $175 million from the fiscal 2022 levels.
Zacks Rank & Key Picks
Vail Resorts currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Consumer Discretionary sector are Funko, Inc. (FNKO - Free Report) , JAKKS Pacific, Inc. (JAKK - Free Report) and Bluegreen Vacations Holding Corporation .
Funko sports a Zacks Rank #1 at present. FNKO has a trailing four-quarter earnings surprise of 96.2%, on average. Shares of the company have declined 10% in the past year.
The Zacks Consensus Estimate for Funko’s current financial-year sales and EPS (earnings per share) suggests growth of 22.7% and 26.8%, respectively, from the year-ago period’s reported levels.
JAKKS Pacific presently sports a Zacks Rank #1. JAKK has a trailing four-quarter earnings surprise of 63.1%, on average. Shares of the company have surged 115% in the past year.
The Zacks Consensus Estimate for JAKK’s current financial-year sales and EPS indicates growth of 4.4% and 8.5%, respectively, from the year-ago period’s reported levels.
Bluegreen Vacations presently carries a Zacks Rank #2 (Buy). BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has surged 63.2% in the past year.
The Zacks Consensus Estimate for BVH’s current financial-year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s reported levels.