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What's in Store for SeaWorld (SEAS) This Earnings Season?

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SeaWorld Entertainment, Inc. (SEAS - Free Report) is set to report second-quarter 2017 results on Aug 8, before the market opens.

Last quarter, the company’s loss was wider than the Zacks Consensus Estimate of loss, which led to a negative earnings surprise of 24.53%. In fact, this Florida-based theme park and entertainment company, has delivered negative earnings surprises in each of the last four quarters, with an average miss of 17.07%.

Let’s see how things are shaping up for this announcement.

SeaWorld Entertainment, Inc. Price and EPS Surprise

Factors to Consider

Generally, the second and the third quarters of each year are seasonally strong quarters for SeaWorld. In this regard, the company expects the trend to heighten in the to-be-reported quarter as it has come up with a robust lineup of new products that include new rides and an Orca show to replace the one which was shut. All of these are expected to boost attendance in the quarter.

Moreover, SeaWorld expects the calendar shift of Easter from the first quarter to the second quarter in 2017 to enhance its profitability.

Additionally, it has launched tactical pricing initiatives at several of its locations. Therefore, with the combination of direct price increases and dynamic pricing initiatives, the company anticipates achieving an increase in admissions per capita in the quarter.

SeaWorld is making every possible effort to regain customers’ confidence as well. Evidently, it continues to organize consumer events to drive attendance. Also, management is undertaking various initiatives to stabilize and deliver improved results in California, Texas and Florida markets. Extended hours at SeaWorld Parks, strategic season pass promotions and more such strategies are expected to offset the prevailing negatives to some extent and attract customers, thereby improving attendance.

We are also optimistic about the company’s sincere efforts to control costs without harming efficiency, and improve its financial standing through debt refinancing that might help in improving margins in the to-be-reported quarter.

Nevertheless, SeaWorld’s total revenue per capita has been under pressure mostly due to lower attendance, especially from Latin American and the UK visitors. The company also believes that though Latin American visitation has improved sequentially, it will take a long time to return to its previous glorious levels.

Additionally, costs related to marketing and reputation campaigns as well as investments in new attractions might hurt profits in the second quarter.

Now, it remains to be seen if promotional offerings are successful in arresting the decline in traffic trends at SeaWorld locations.

Earnings Whispers

Our proven model does not conclusively show earnings beat for SeaWorld this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen, which is not the case here, as you will see below.

Zacks ESP: SeaWorld has an Earnings ESP of -5.88%. This is because the Most Accurate estimate is 32 cents per share, while the Zacks Consensus Estimate is pegged at 34 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: SeaWorld has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. But its negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks to Consider

Here are some companies in a similar space to consider as our model shows they have the right combination of elements to post earnings beat this quarter:

Norwegian Cruise Line Holdings, Inc. (NCLH - Free Report) has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Black Diamond, Inc. has an Earnings ESP of +50.00% and a Zacks Rank #3.

Camping World Holdings, Inc. (CWH - Free Report) has an Earnings ESP of +5.8% and a Zacks Rank #3.

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