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Vail Resorts (MTN) Banks on Season Pass Program, Costs High
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Vail Resorts, Inc. (MTN - Free Report) is likely to benefit from a solid season pass program, acquisition initiatives and investments in expansion projects. However, the coronavirus-induced soft traffic and high labor costs are a concern.
Let us discuss the factors that suggest investors should retain the stock for the time being.
Growth Catalysts
Vail Resorts has been witnessing solid season pass sales for the upcoming 2022/2023 North American ski season. Season-to-date (through May 31, 2022), the company stated that Pass product sales had increased approximately 9% in units and nearly 11% in sales dollars compared with the prior-year period (through Jun 1, 2021). The company reported strong unit growth related to its renewing pass holders. Also, MTN reported solid sales with respect to the Epic Australia Pass. Unit sales through May 31, 2022, were up approximately 28% from the comparable period through June 1, 2021. The company is likely to have benefited from the acquisition of Falls Creek and Hotham.
Vail Resorts is optimistic about strong leisure travel demand and unit growth in destination markets. The company’s ability to leverage guest data, targeted digital marketing efforts, broad product offering and associated discounts will likely 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 for operating 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. It anticipates the initiative to generate more than CHF 5 million EBITDA in the fiscal year ending Jul 31, 2024.
The company continues to reinvest in its resorts to boost customer traffic. For fiscal 2022, the company set aside $315-$325 million to increase 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 the initiative will boost lift capacity by more than 45% in the locations. The company anticipates the projects to be completed in time for the 2022/2023 North American winter season. However, Vail Resorts stated that developments are subject to regulatory approvals.
Image Source: Zacks Investment Research
In the past three months, shares of the company have declined 13.7% compared with industry’s 34.6% fall.
Concerns
Although the company is optimistic about the 2022 performance, the coronavirus-related woes cannot be ruled out. In the fiscal third quarter, the company’s operations were negatively impacted by the coronavirus-induced operational restrictions, capacity constraints and staffing challenges. Also, the company’s ancillary businesses were affected by the same. Even though the company is witnessing sequential improvements in visitation, it is still lower than the pre-pandemic levels. Given the uncertainty surrounding the crisis, chances of future outbreaks and prolonged shutdowns cannot be ruled out.
The company’s margins have been bearing the brunt of inflationary labor costs. In the fiscal third quarter, the company’s margins were negatively impacted by inflationary labor costs. In the quarter, labor-related costs increased 35.9% primarily due to increased staffing associated with improved North American operations, owing to fewer COVID-19-related limitations and restrictions and improved demand on a year-over-year basis. The company stated that it increased focus on hiring, retention and talent development for supporting business operations in the upcoming periods. For fiscal 2023, the company anticipates labor expenses, including inflationary adjustments, to be more than $175 million from fiscal 2022 levels.
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has surged 32.6% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Funko sports a Zacks Rank #1. FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 12.1% in the past year.
The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 26.8% and 31%, respectively, from the year-ago period’s reported levels.
Civeo sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have soared 52.2% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and EPS suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.
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Vail Resorts (MTN) Banks on Season Pass Program, Costs High
Vail Resorts, Inc. (MTN - Free Report) is likely to benefit from a solid season pass program, acquisition initiatives and investments in expansion projects. However, the coronavirus-induced soft traffic and high labor costs are a concern.
Let us discuss the factors that suggest investors should retain the stock for the time being.
Growth Catalysts
Vail Resorts has been witnessing solid season pass sales for the upcoming 2022/2023 North American ski season. Season-to-date (through May 31, 2022), the company stated that Pass product sales had increased approximately 9% in units and nearly 11% in sales dollars compared with the prior-year period (through Jun 1, 2021). The company reported strong unit growth related to its renewing pass holders. Also, MTN reported solid sales with respect to the Epic Australia Pass. Unit sales through May 31, 2022, were up approximately 28% from the comparable period through June 1, 2021. The company is likely to have benefited from the acquisition of Falls Creek and Hotham.
Vail Resorts is optimistic about strong leisure travel demand and unit growth in destination markets. The company’s ability to leverage guest data, targeted digital marketing efforts, broad product offering and associated discounts will likely 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 for operating 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. It anticipates the initiative to generate more than CHF 5 million EBITDA in the fiscal year ending Jul 31, 2024.
The company continues to reinvest in its resorts to boost customer traffic. For fiscal 2022, the company set aside $315-$325 million to increase 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 the initiative will boost lift capacity by more than 45% in the locations. The company anticipates the projects to be completed in time for the 2022/2023 North American winter season. However, Vail Resorts stated that developments are subject to regulatory approvals.
Image Source: Zacks Investment Research
In the past three months, shares of the company have declined 13.7% compared with industry’s 34.6% fall.
Concerns
Although the company is optimistic about the 2022 performance, the coronavirus-related woes cannot be ruled out. In the fiscal third quarter, the company’s operations were negatively impacted by the coronavirus-induced operational restrictions, capacity constraints and staffing challenges. Also, the company’s ancillary businesses were affected by the same. Even though the company is witnessing sequential improvements in visitation, it is still lower than the pre-pandemic levels. Given the uncertainty surrounding the crisis, chances of future outbreaks and prolonged shutdowns cannot be ruled out.
The company’s margins have been bearing the brunt of inflationary labor costs. In the fiscal third quarter, the company’s margins were negatively impacted by inflationary labor costs. In the quarter, labor-related costs increased 35.9% primarily due to increased staffing associated with improved North American operations, owing to fewer COVID-19-related limitations and restrictions and improved demand on a year-over-year basis. The company stated that it increased focus on hiring, retention and talent development for supporting business operations in the upcoming periods. For fiscal 2023, the company anticipates labor expenses, including inflationary adjustments, to be more than $175 million from 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 Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation , Funko, Inc. (FNKO - Free Report) and Civeo Corporation (CVEO - Free Report) .
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has surged 32.6% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Funko sports a Zacks Rank #1. FNKO has a trailing four-quarter earnings surprise of 78.7%, on average. Shares of the company have declined 12.1% in the past year.
The Zacks Consensus Estimate for Funko’s current financial year sales and EPS suggests growth of 26.8% and 31%, respectively, from the year-ago period’s reported levels.
Civeo sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have soared 52.2% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and EPS suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.