Vail Resorts (MTN) Rides On Acquisitions Despite High Costs

Vail Resorts, Inc. (NYSE:MTN) relies on extensive marketing and acquisition strategies to drive growth. The company’s widespread geographical locations also help it to cushion the business against weather disruption in any particular region. However, high costs, stemming from operations and acquisitions, are concerns.

In the second quarter of fiscal 2019, the company’s earnings surpassed the Zacks Consensus Estimate. In fact, earnings beat the consensus mark in each of the trailing four quarters, the average surprise being 3.8%. Total revenues in the reported quarter were favored by growth in each segment. Further, Vail Resorts’ season pass and large ski offerings drove incremental growth.

Notably, shares of Vail Resorts have lost 1.6% over the past year, outperforming the industry’s decline of 10.3%.

Sales-Driving Initiatives Bode Well

Vail Resorts has a season pass program under which the company offers a variety of season pass products for all the mountain resorts and urban ski areas in both domestic and international markets. Increased demand for skiing helped the company to witness higher season pass sales, across all products and geographies, including destination markets in the second quarter of fiscal 2019.

Robust growth in the season pass sales reflects Vail Resorts’ efficient guest-focused marketing efforts. The company orients its strategy with data analytics to drive targeted and personalized marketing toward guests. Guest data is captured through season pass programs; e-commerce platforms, including mobile lift ticket sales; the EpicMix application and operational processes at the lift ticket windows. Additionally, Vail Resorts engages in digital marketing and media advertising to drive traffic and sales.

Meanwhile, the company spent more than $1.2 billion over the last decade to drive guest loyalty. It is also about to implement new technology to improve direct-to-lift access at Vail, Beaver Creek and Keystone.

Vail Resorts’ focus on acquisitions and mergers to build stronger portfolio of differentiated and varied services is encouraging. On Aug 15, 2018, the company acquired Stevens Pass Resort in Washington from Ski Resort Holdings, LLC, for $64 million. Additionally, on Sep 27, 2018, management acquired Triple Peaks, LLC — the parent company of Okemo Mountain Resort in Vermont; Crested Butte Mountain Resort in Colorado and Mount Sunapee Resort in New Hampshire for a cash price of roughly $74 million.

Vail Resorts expects these buyouts to positively contribute toward the company’s operating results going forward.

Concerns

While Vail Resorts’ consistent acquisitions and mergers are likely to benefit it over the long term, there are certain short-term risks as well. The company is somewhat struggling with added expenses, stemming from acquisitions. In fiscal 2018, EBITDA included $10.2 million of buyouts and integration-related expenses.

Additionally, Vail Resorts’ operational efficiencies come at the cost of increased expenses.During the second quarter of fiscal 2019, total segmental operating expenses increased 6.6% year over year to $492.9 million. Resort operating expenses totaled $491.5 million, up 6.8% year over year.

Zacks Rank & Stocks to Consider

Vail Resorts currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same industry are Planet Fitness (NYSE:PLNT) , SeaWorld (NYSE:SEAS) and Live Nation (NYSE:LYV) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Planet Fitness, SeaWorld and Live Nation’s earnings for 2020 are expected to increase 21.8%, 18.1% and 55%, respectively.

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