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SeaWorld's PR Nightmare Could Affect Next Quarter

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Theme parks have been a surprisingly strong investment in the past few years, mainly because while families are recovering from the financial crisis and getting out of the house, they are choosing more conservative, close-to-home vacations. SeaWorld (NYSE: SEAS  ) , the increasingly controversial interactive aquarium park, had benefited in recent years from growing revenue, better margins, and operating income.

The company has only been available to retail investors since April, when the stock debuted to a seemingly disinterested market. Since then, the stock has remained roughly flat. In the recently ended quarter, however, things looked to be improving -- or at least stabilizing. The question now is, with a damaging attack against the company in the form of a jaw-dropping documentary, can SeaWorld draw more visitors in?

Earnings recap
Before we get to the image and ethical issues facing the company, let's take a look at how things are moving along.

SeaWorld made a splash (sorry) with net income up 30% over the prior year's number to $120.2 million -- $1.33 per share. The figure came in at a sharp premium to the average analyst expectations of $1.19 per share. Sales grew just 3% to $538.4 million. Though attendance still dropped -- down 3.6% this quarter -- the bleeding seems to have slowed from last year, when the company saw a near 10% year-over-year decline in traffic.

Free cash flow grew 15% to $140.8 million, driven by the company's record EBITDA of $254.4 million -- a 10% gain over the prior year.

Looking ahead, the company expects as much as $1.46 billion in revenue, down slightly from previous estimates of as much as $1.48 billion. The company did, however, bump up its EBITDA guidance by $2 million on both ends -- now expecting in the range of $432 million to $442 million.

By the looks of it, the company had a pretty strong quarter. Still, the market had a muted reaction to the results, perhaps because of the lowered revenue guidance. Another thing to consider is whether the market predicts coming issues now that CNN has rebroadcast a troubling piece on the company.

Though sharply refuted by SeaWorld management, the recent Blackfish documentary about the treatment of the theme park's animals could be a sticky enough story to keep increasingly conscious families from visiting the allegedly negligent parks. The film centers around the 2010 death of a whale trainer and how killer whales are highly evolved sentient creatures that are physically and psychologically injured by remaining in small concrete bodies of water.

The story has received immense attention from media, bloggers, and everyday folk who have developed sharp opinions on the matter. It's not going to bring the company to the ground, but it may very well affect attendance in the short to medium term. The recently ended earnings period does not reflect the effects of the October-released documentary.

Though theme parks are a compelling investment thesis these days, investors may want to look elsewhere. SeaWorld has a black eye at the moment, and thrill-seekers could get their jollies in a less controversial manner.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 14, 2013, at 5:06 PM, 919Florida wrote:

    The film was released in theaters July 19 so yes this past quarter does reflect numbers since the movie was released. Also if you lsiten to the conference call you will learn that since the release on CNN Oct 24 attendance at the parks have actually increased. I visit Seaworld Orlando 3 days a week on average and attendance is better then I have seen in past years. Overflow parking ltos have been filled and shows have been at capacity etc. The numbers are not going down here in Orlando.

  • Report this Comment On November 14, 2013, at 6:20 PM, maxo789 wrote:

    To 919Florida. You are either bag holder left with this worthless stock or someone in the corporate office who is in denial. Nobody goes to SeaWorld 3 times a week. You are a liar. Attendance is way down, 86% percent of people who watched Blackfish won't go back to SeaWorld. There are websites totally devoted to informing people about the truth about this company, there are protests outside of their parks, there are facebook pages full of disgust about their treatment of their orcas and then ofcourse there is a hugely popular film that might win an oscar exposing your company. This film touched a nerve with many people. You don't have this at Disney or Six Flags. Seaworld is finished unless it does something to change it's image.

  • Report this Comment On November 14, 2013, at 7:00 PM, maxo789 wrote:

    Attendance at its 11 parks declined 3.6% during the quarter. SeaWorld points out that this is sequential improvement from the 9.5% dip in turnstile clicks during the second quarter, but it's still a negative showing. Revenue at the company rose only because the average guest paid 9.1% more to get in and spent 3.5% more on food, merchandise, and other in-park items than during last year's telltale summer quarter.

  • Report this Comment On November 15, 2013, at 11:42 AM, 919Florida wrote:

    Don’t call me no liar. I get to SeaWorld after work on Friday's and I spend my Saturday and Sunday's there as well. I am not a bag holder of stock as I don’t play any stocks in the market and secondly I am not in the corporate office so don’t go making any assumptions you can’t back up with facts.

    Of course there are Facebook posts and protest happening because you anti cap people don’t want to look and see the truth what goes on in the park. You have an agenda that you want to stick to. I know how all these animals are cared for and taken care of. You are basing your opinion on one sided documentaries and the internet. These animals receive the best world class care.

    Attendance is not way down like you claim that it is. Orlando is on pace for record attendance this year. My friends who visit the other two SeaWorld parks say the same thing.

    Fact 1: Parking lots are filling overflow parking now even in off peak times

    Fact 2: Stadiums are at capacity or near capacity every day. Shamu Stadium alone holds 6000 people and is usually full for two shows a day.

    Fact 3: CNN's poll of 86% after the movie is not accurate at all. It’s not a scientific poll at all reflecting how EVERYONE feels. Anti-cap people were face booking and tweeting the link to all their followers telling people to basically stuff the ballet box and share with their followers.

  • Report this Comment On November 16, 2013, at 3:58 PM, maxo789 wrote:

    These animals don't belong in captivity. They are sentient, emotional and intelligent animals. Having them do silly tricks for food is not education it's amusement. SeaWorld is a amusement park. Just like a circus it's time has passed. Living in a concrete box that is no where enough space is abuse. I suggest you go whale watching one day if you love whales and see what their lives should be.

    You want some facts. Here you go:

    Despite their claim, marine parks do not help to conserve marine mammals through their breeding programs. The marine mammals most commonly bred in captivity are not considered threatened or endangered.

    Aquariums have no intention of returning captive breed animals to the wild. In fact, they frequently argue that the success of such endeavors would be unlikely and vehemently oppose release efforts.

    The results of studies conducted in captivity may not be adequately extrapolated to wild animals for several reasons. Captive marine mammals live in small, sterile enclosures and are deprived of their natural activity level, social groups and interactions with their natural environment, and many captive marine mammals develop stereotypic behavior and/or aggression not known to occur in the wild. What we have learned from captive research is that orcas and dolphins are more intelligent than previously imagined, providing more evidence that a life in captivity is inhumane.

    Current research shows that there is a significant difference between the longevity of captive and wild orcas/dolphins. Despite the controlled environment, routine veterinary care and medications including anti-depressants, captive dolphins and orcas do not live as long as their wild counterparts.

    Forcing orcas and dolphins to live in groups dictated by humans disrupts the dynamics of the natural hierarchy, which in turn upsets their natural behavior.

    Surveys show that most people prefer to see marine mammals displaying natural behaviors rather than performing “tricks and stunts.”

    A public display of wild animals is not necessary to engage people. Many wild animals, including several whale species, enjoy a high degree of public interest and concern despite never being maintained in captivity for public display.

    Keeping wild animals in captivity for human amusement is inherently cruel, as it deprives them of the ability to freely engage in instinctual behaviors in their natural environment.

  • Report this Comment On November 25, 2013, at 12:44 PM, maxo789 wrote:

    Hey 919Florida,

    Howard Stern said it best. "What kind of idiot goes to SeaWorld anyway?" I think we found one Howard. Boycott animal abuse. Would you rather be living in the ocean in your pod or performing tricks in a tiny chemically treated at SeaWorld if you were an orca?

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