Why Vail Resorts Could Celebrate an Early Winter Even More Than Polaris and Arctic Cat

Vail Resorts (NYSE: MTN  ) will release its quarterly report on Monday, and already, investors are celebrating an early cold snap in the American West by sending the resort company's stock toward yearly highs. To an even greater extent than winter-equipment makers Polaris Industries (NYSE: PII  ) and Arctic Cat (NASDAQ: ACAT  ) , Vail Resorts relies on a solid snow season in order to get visitors to come to its ski properties and stay at its resorts.

Obviously, Vail Resorts has a strong seasonal component to its earnings, and so expecting much from the company's October quarter is a huge mistake. Unlike Polaris and Arctic Cat, which have taken strides toward diversifying their winter business into an all-season affair with different types of equipment, Vail Resorts still largely relies on winter sports for the bulk of its success. Yet even with its seasonal losses during the late summer and early fall, Vail Resorts hopes to set the stage for better performance in its high season. Let's take an early look at what's been happening with Vail Resorts over the past quarter and what we're likely to see in its report.

Stats on Vail Resorts

Analyst EPS Estimate

($1.91)

Year-Ago EPS

($1.70)

Revenue Estimate

$121.19 million

Change From Year-Ago Revenue

4.2%

Earnings Beats in Past 4 Quarters

0

Source: Yahoo! Finance.

Can Vail Resorts earnings finally perform well?
In recent months, analysts have had mixed views about Vail Resorts earnings. They've widened their October-quarter loss estimates by $0.06 per share, but they've boosted their views for the January quarter and the full 2014 fiscal year, expecting a better winter season than last year. The stock has climbed 9% since early September.

Vail Resorts didn't bring much momentum into the quarter, posting July quarter results that were underwhelming. The company's loss widened by 11%, with revenue slipping slightly during the offseason late spring and early summer months. Vail Resorts' guidance didn't raise any eyebrows, with the stock making only a muted response to the news given that neither of the two quarters in question is particularly important to the company's overall prospects.

But the key to understanding Vail Resorts is that competition is limited by the high barriers to entry involved in the ski-resort business. Given the rarity of high-quality ski properties and the difficulty and expense in getting permits to build a new ski area from scratch, Vail Resorts' premium portfolio of attractive properties in high-profile areas like Colorado, Utah's Park City, and Lake Tahoe is hard to match. Vail Resorts has also looked to international destinations for growth, combining resort properties with associated rental opportunities to build new revenue sources.

One reason Vail might do better this year is that the winter last year had disappointing snowfall totals. That will make it easier for Vail to outperform last year's numbers, which could cause a boost among investors who aren't as familiar with the seasonal nature of the company's business. That would certainly explain some of the gains in Polaris and Arctic Cat, although with the equipment makers, you also have to include their efforts to diversify and become less seasonally dependent on winter -- something that Vail Resorts really can't expect for its part.

In the Vail Resorts earnings report, watch to see if the company announces any surprising guidance for its key winter quarter. With so much at stake, Vail Resorts needs to prove that it can make the most of favorable conditions when they arise, in order to make up for poor years when the weather hasn't cooperated.

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