They say that the market is a roller coaster. If you feel that way, why not invest in a literal roller coaster stock? The next few days will be a great time to take the pulse of amusement park and theme park operators during the telltale summer season. Cedar Fair(NYSE: FUN) reported fresh financials on Wednesday morning. SeaWorld Entertainment(NYSE: SEAS) follows on Thursday. Six Flags Entertainment(NYSE: SIX) shareholders will buckle up for their quarterly thrill ride next week.
The three stocks are also connected by an unrequited love affair. Cedar Fair reportedly shot down a $4 billion offer to be acquired by Six Flags nearly three years ago, and SeaWorld failed to woo Cedar Fair with its $3.4 billion bid earlier this year. Sector consolidation may eventually happen among the leading players, but for now there are some actual fundamentals to consider in sizing up the industry's near-term prospects.
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Fair play
Cedar Fair posted mixed results ahead of Wednesday's market open. Net revenue more than doubled to $509.5 million for the fiscal second quarter, but it fell short of the $526.5 million that analysts were targeting. Net income of $50.8 million -- or $0.89 per unit -- reversed a year-ago deficit. However, Wall Street was holding out for a profit of $1.41 a unit.
A big miss on both ends of the income statement may sound a lot worse than a "mixed" performance, but the news gets better beyond that. Cedar Fair is back above where it was in 2019, the last pre-pandemic year that many companies are using as a turnaround measuring stick. Revenue, net income, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are up 17%, down 20%, and up 5% from where they landed for the same quarter three years ago.
Like the leading theme park operators, Cedar Fair is benefiting from guests willing to pay up for escapism. Revenue is higher than 2019 despite attendance clocking in 8% lower. In-park per capita spending of $59.52 is 26% higher than the springtime and early summer of 2019.
Perhaps the biggest news out of Cedar Fair on Wednesday -- for income investors, at least -- was the return of its payouts. Cedar Fair declared a distribution of $0.30 for each unit. It's the first distribution announced since February 2020, weeks before the pandemic put the chain of regional amusement parks in capital preservation mode. The new distribution is less than a third of its previous quarterly rate, but Cedar Fair has other plans for its recent good fortune. The chain is also allocating $250 million for buybacks.
Holding back on payouts may have cost it more than a few income investors, but it was the right call. Cedar Fair has now been able to repay 75% of the debt it took on during the pandemic. With borrowing costs rising it's hard to argue against the strategy.
Cedar Fair's second quarter ended on June 26, so it's barely the peak summer travel season. It did offer up its performance through the end of July, and that shows the chain is even further ahead of where it was in 2019 by the end of last month.
Every chain is different, but there should be some similarities when SeaWorld Entertainment reports on Thursday morning and Six Flags a week after that. Attendance levels should continue to be below 2019, but revenue should be hitting fresh seasonal records. It may not always be that way. There's no denying that leisure stocks including park operators need disposable or discretionary income available to thrive. For now, it seems to be a good time to enjoy the ride with so many of these havens of whimsy trading well below their previous highs.
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Rick Munarriz has positions in SeaWorld Entertainment and Six Flags. The Motley Fool has positions in and recommends Six Flags. The Motley Fool recommends Cedar Fair and SeaWorld Entertainment. The Motley Fool has a disclosure policy.
